The European Commission will on Thursday submit to the Management Committee a draft Regulation allowing the export of an additional 500,000 tonnes of out-of-quota sugar in the 2009/2010 marketing year (to July 31st 2010).
This temporary measure, which fully respects the EU's international obligations, has been made possible by the exceptional market conditions at both the EU and world level. The present market situation for sugar is very unlikely to occur again in the future
Mariann Fischer Boel, European Commissioner for Agriculture and Rural Development, said: “The current situation on the world market is exceptional. With production below consumption and diminishing sugar stocks, sugar prices have risen to unprecedented levels, to the detriment of consumers in poorer countries. This situation has coincided with the end of the restructuring of the EU sugar industry. The EU market price has been reduced and the least competitive producers have stopped sugar production, improving the competitiveness of the EU sugar sector, both at beet producer and factory level. The price situation on the EU and world market as well as production costs for beet and sugar in the EU are such that out-of-quota sugar produced in the EU can be exported without violating the EU's WTO subsidy commitments." .
World market sugar prices are currently at record levels, well above the market price for EU quota sugar. Unfavourable weather conditions in India and Brazil have worsened the global sugar deficit and further diminished sugar stocks, triggering an upward pressure on world market prices.
In contrast, a very good harvest in the EU in 2009 led to the production of higher than expected quantities of out-of-quota sugar. It also allowed the price for quota sugar to continue to converge towards the lower reference price applicable after the sugar reform, despite the trend of rising sugar prices on the world market. This development also shows that the 2005 sugar reform has improved the overall competitiveness of the EU sugar sector by encouraging high-cost producers to stop production and growers in regions not adapted to beet growing to switch to more profitable crops.
Successful restructuring means no final quota cut needed in EU
Against this background, the Commission has decided that it is not necessary to apply a final quota cut in order to reach a structural balance on the EU sugar market after the end of the restructuring period. Through voluntary renunciation through the Restructuring Fund, quotas have been reduced by 96.6 percent of the initial target of 6 million tonnes set out in the reform. As such, the reform can be regarded as a success.
In the more competitive and restructured EU sugar sector, the market price for out-of-quota beet and out-of-quota sugar are currently both above production cost levels, which enables the EU to allow the export of an additional quantity of 500,000 tonnes of out-of-quota sugar before end of July 2010, while still respecting international obligations. This should be regarded as an exceptional measure for the 2009/2010 marketing year only and the Commission services will continue to closely monitor the EU and world market. For 2010/2011, the export limit is expected to be again at 650,000 tonnes, as fixed in the regulation.
Import quota for sugar for the chemical industry
At the same time, the Commission is preparing a Regulation allowing the duty-free import of 400,000 tonnes of sugar from the world market to be possibly used by the chemical industry in 2010/2011 to ensure the long-term raw material supply planning for this sector, which is also a traditional user of EU out-of-quota sugar.
CXL-import quota for refiners of raw sugar
Finally, access to raw sugar to be refined under CXL-import quotas will be facilitated by the suspension of the requirement to present export certificates from Brazil, Australia and Cuba for imports from these countries in 2009/2010. A certificate of origin will be sufficient.