13 February 2006 -
Reform of the European Sugar Market Regulation
The Council of the Ministers of Agriculture of the European Union agreed on a reorganisation of the Common Sugar Market Regulation on 24 November 2005, with the core elements of the Commission's reform proposal of 22 June 2005 being adopted.
This includes a drastic reduction of the sugar reference price and the sugar beet price from 2006/07, the creation of a Restructuring Fund and the possibility for previous C-sugar producers to purchase a total quota of 1.1 million tonnes. These measures are aimed at strengthening the competitiveness of the European sugar industry and at the same time creating a long-term perspective for efficient producers. The reform had become inevitable after the WTO panel was lost in spring 2005.
The Restructuring Fund will offer to buy quotas from sugar producers on a voluntary basis over the period 2006/07 to 2009/10. Regions which largely abandon sugar production will receive compensation in the form of additional regional aid for the sugar factories that are to be closed and for giving up sugar beet production. It will still be possible for sugar to be imported into the EU from less developed countries but the growth in volume will be capped by protective clauses. The previous C-sugar producers will be able to purchase an additional quota of up to 1.1 million tonnes. The reduction of the sugar reference price by a total of 36 % and the sugar beet price by 39 % is less than had been put forward in the Commission's proposal of 22 June 2005 and will now take place in four steps over the period 2006/07 to 2009/10. An average of 64.2 % of the income lost by beet growers as a result of the reduction of beet prices is to be compensated.
The reform that has been passed offers efficient producers reliable framework conditions and long-term planning certainty through to September 2015. Compared with the European Commission's proposal of 22 June 2005, Südzucker welcomes the now 3 percentage point lower price reduction and the improved framework of the Restructuring Fund.
Südzucker assumes that the planned price reductions and the volume restrictions will lead to far-reaching structural changes in the European sugar industry. Especially producers in climatically less suitable beet-growing regions of the EU will accept the Restructuring Fund's offer, thus significantly reducing the present production capacity in the EU. Thanks to the concentration of the Südzucker factories in the most efficient regions with the highest sugar yields in Europe the company is in an excellent competitive position. To strengthen its competitiveness, Südzucker will also undertake cost-cutting and structural measures in order to defend the profitability of the Sugar segment despite the considerable burdens from the price reductions.
At the WTO summit in December 2005 in Hong Kong it was resolved to stop all officially supported exports by 2013; the reform of the Sugar Market Regulation already largely takes this into account. Further resolutions, especially on market access, are to follow later in the course of 2006.