ISO Council Session
Istanbul
23 May April 2006
Gábor Zsugyelik
The impact of the new EU Sugar
Regime on the various stake holders
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Reform objectives
Main instruments
Restructuring fund
Impact on stake holders
– In the EU
– Outside the EU
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REFORM – objectives & timing
 Improve competitiveness & market orientation
 Create a sustainable market balance in consistency
with the EU’s international commitments
 Bring the sugar regime in line with the CAP reform
process
 Long-term policy framework (2014/2015)
 Budget neutrality
 Entry into force 1 July 2006; 4 years of transition
 Marketing year 1 October / 30 September
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REFORM – major instruments 1
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Intervention price  reference price
Limited intervention until 2009/2010
Private storage
Price cut : 36% over 4 years
White sugar reference price : 404.4 €/t
Raw sugar reference price : 335.2 €/t
Minimum sugar beet price : 26.3 €/t
Compensation for growers (decoupled)
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REFORM – major instruments 2
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Quotas merged
Out-of-quota production : specific destinations
« Super Levy »
1.1 Mt additional domestic quota can be purchased
Isoglucose quota increased by 300 000 t
Compulsory quota cut at end of transition -if needed
Carry forward out-of-quota sugar
Withdrawal of quota sugar (annual measure)
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Expected impact of the reform on the
EU sugar balance 1.
 Current situation:
– Production: 19-20 Mt
– Consumption: 16 Mt
– Imports: 2.0 Mt
– Exports: 5-6 Mt (2.5 Mt with refund)
– Quota: 17.4 Mt
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Expected impact of the reform on the
EU sugar balance 2.
 Situation after reform:
– Production: 12-13 Mt
– Consumption: 16 Mt
– Imports: 3.5-4.0 Mt
– Exports: 0-1.0 Mt
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Why restructuring fund?
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Avoid obligatory linear quota cut
Quota transfer between MS rejected
Accelerate restructuring of the sector
Financial incentives to leave
No EU money involved – 100% self-funding
Funded by levy paid on quota
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REFORM – restructuring fund
 Incentive to less competitive producers to
leave sector
 Provide resources to cope with
consequences of factory closure
 Aid : 730 €/t, 730 €/t, 625 €/t, 520 €/t
 Levy : 126.4€/t, 173.8 €/t, 113.3 €/t
 At least 10% of the aid reserved for growers
 Commission report by 2008
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Expected effects of R.Fund
 3-5 mio t renounced
 Lower EU output: only under quota
 Concentration of sugar production in more
competitive regions
 (Reduction of inulin syrup production)
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Effects on EU beet growers
 If competitive: lower price + decoupled
compensation
 New outlet: beet growing for bioethanol
(inspired by Brazil)
 Switch to other crops
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Effects on EU sugar producers
 Concentration &/or reduction of capacity
 « C » sugar capacity cut or look for EU
market
 In case of closure:
– transfer into refiner
– transfer into biofuel plant
– total dismantling
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Export possibilities
 Quota sugar with/without refunds (Art 32)
 Part of withdrawn sugar (Art 19)
 Out-of-quota sugar - Art 12(d)
Total EU exports shall not exceed the Community‘s
WTO limits of 1.3 Mt and 513 M€ (minimal increase).
Role of export refund expected to decline.
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Effects on world market
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Increasing (temporarily ?) WM prices
– Higher self-sufficiency of importers
 Higher market volatility (speculation)
 Gap to be filled:
– Destination refiners (BRA raw sugar)
– White exports from BRA/India/other?
– EU becomes net importer
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Impact on ACP and LDC
 EU committed to purchase 1.3 Mt ACP
sugar
 EU sugar market free from 2009 for LDC
 System of guaranteed price kept
 Significant amounts of compensation
 Higher WM + lower EU prices might divert
exports to other destinations
 EU price now only 50-60% higher than WM
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Conclusions
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Significant drop of EU production + exports
EU to become net importer
Concentration on EU sugar industry
Higher WM prices and volatility
Maintained (ACP) + improved (LDC) market
access to the EU
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THANK YOU FOR YOUR
ATTENTION!
TEŞEKKÜR!
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