EU sugar quota plan may make consumers pay more for longer

The EU sugar beet industry had been bracing for the end to restrictive production quotas by a target date of 2015, which would leave them to compete with imports from low-cost producers such as Brazil.

But the European Parliament's agriculture committee on Jan. 23 voted to extend the current European Union sugar regime, one of the most highly protected aspects of European agricultural policy, until October 2020.

A plenary European Parliament vote is scheduled for the week starting March 11, with a final decision due by June after talks involving the European Commission and the European Council.

Food and beverage companies that use sugar and starch say extending the quotas will damage small- and medium-sized firms by inflating their costs and could put the least efficient out of business.

Sugar growers and refiners say they need more time to make improvements to be able to compete in the global market and that removing barriers too soon would threaten their survival.

The average reported price for white sugar in the EU is around 728 euros (US$970) per ton, according to European Commission data, well above the world price of 372 euros on Wednesday.

“We are trying to demonstrate to members of the European Parliament the negative economic impact that the current regime has on users, particularly small and medium-sized businesses,” Muriel Korter, secretary general of the Committee of European Users of Sugar, said in an interview.

“Quotas are benefiting the sugar processing industry hugely, whereas some small sugar-using companies are struggling for survival,” she added.

Members of the Brussels-based CIUS, which includes companies such as Coca-Cola, Danone and Nestle, buy almost 70 percent of Europe's annual consumption of sugar.

Jorn Dalby, president of the International Confederation of European Beet Growers (CIBE), said the agriculture committee vote was a step towards ensuring the future survival of beet farming in the European Union.

The European beet sector has raised efficiency and yields since the 2006 introduction of EU reforms to phase out protection, Jamie Fortescue, managing director of the European Starch Industry Association (AAF), said in an interview.

The latest proposal acknowledges that the EU sugar sector needs more time to be able to compete effectively on the world market, Johann Marihart, president of the European Committee of Sugar Processors (CEFS), said in a statement.

The debate over whether to prolong quotas pits Britain, Italy, Scandinavian countries and the Netherlands, which favor 2015, against France, Germany and Spain which want protection to carry on for a further five years, EU trade sources said.

This issue is part of planned reforms to the EU's hugely expensive Common Agricultural Policy (CAP), which protects farming by subsidizing growers' livelihoods.

An eventual compromise solution involving a partial extension of quotas, perhaps to 2018, is a possibility.

“Chances of getting a 2020 deal waved through without compromise are reasonably limited,” said John Ireland, a trader at London-based commodities house Czarnikow.

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