Bloomberg News

EU to End Sugar Quotas After 2015 in New Agriculture Policy

October 12, 2011

(Updates with professor comment in fourth paragraph.)

Oct. 12 (Bloomberg) -- The European Union, the world’s largest grower of sugar beets, wants to abolish limits on domestic sugar production in 2015, ending a policy that caused a supply shortage of the sweetener in the bloc this year.

Sugar quotas should expire on Sept. 30, 2015, the European Commission, the EU’s regulatory arm, said today in proposals for the bloc’s future agriculture policy. The quotas now cap how much sugar can be produced for the EU’s domestic market.

The EU spent four years since 2006 shrinking its sugar- beet industry to comply with a World Trade Organization ruling limiting exports, turning the 27-nation bloc into a net importer. Surging global prices since 2009 meant importers to the EU have been able to sell sugar for more elsewhere. That left food companies without enough supplies, Nestle SA says.

“The higher the sugar price, the more there will be an increase in production by the more efficient beet-producing countries in Europe, and the lower the scope for imports,” Alan Matthews, emeritus professor of European agriculture policy at Trinity College in Dublin, said by phone yesterday. “The expansion would take place in Poland, Germany, France.”

Subsidized Sugar

The WTO ruling limits EU exports of subsidized sugar to 1.37 million metric tons. Beet growers have been asking to increase the amount of sugar they can ship outside the region, as well as how much can be sold for food use within the bloc.

“With most developing countries enjoying unlimited duty- free access to the EU market, but EU exports limited by WTO rules as long as there are quotas, an end to quotas is the only option for providing the sector with a long-term perspective,” the commission said in the statement today.

The EU began paying sugar factories to shut in 2006 to cut output. Tate & Lyle Plc, after 132 years in the business, sold its EU refineries last year to American Sugar Refining Inc. Danisco A/S, based in Copenhagen, sold its sugar operations in 2009 to Germany’s Nordzucker AG.

The consumption-sugar quota for the 2011-12 season that started Oct. 1 is about 13.8 million tons, according to the commission. EU farmers can’t sell their entire crop for food use because of the quotas.

EU sugar production is forecast to exceed 18 million tons this year, up from 15.4 million tons in 2010 and 17.5 million tons in 2009, French crops office FranceAgriMer said last month.

Without quotas, “the production response and therefore the effect on imports will be determined by the level of world sugar prices at the time, that is over the next decade,” Trinity College’s Matthews said.

Frost Damage

The EU sugar beet crop was 10 percent smaller last year because of frost, according to the U.S. Department of Agriculture. That pushed up sugar prices as much as 70 percent in some parts of the EU, according to Rabobank International.

To boost supplies, the EU authorized more sugar imports at zero duty. White, or refined, sugar was selling in Europe at about 517 euros ($712) a ton in March, more than the EU’s reference price of 404.40 euros, spurring the EU to take market action to boost supplies, according to Rabobank.

After the end of quotas, white, or refined, sugar would become eligible for private-storage aid, the commission said.

--With assistance from Isis Almeida in London. Editors: Claudia Carpenter, Dan Weeks

To contact the reporter on this story: Rudy Ruitenberg in Paris at rruitenberg@bloomberg.net.

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.


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