Fabian Demicoli

Success of EU Sugar Reform

 The 2006-2009 scheme for the restructuring of the European sugar industry resulted in the renunciation of 5.8 million tonnes of quota.

At the end of this 4-year process, a key element of the 2006 sugar reform, EU quota for sugar and isoglucose has been lowered to 14 million tonnes. EU sugar production is now concentrated in 18 Member States (as opposed to 23 before the reform) which enjoy favourable agronomic conditions and nearly 70 percent of production is in 7 Member States with the highest sugar yields. Domestic prices are showing a downward trend consistent with the objective of the reform to achieve a sustainable and competitive EU sugar sector.

The key to the reform was a 36 percent cut in the guaranteed minimum sugar price (from €631.9/tonne in 2006/2007 to €404.4/tonne from 2009/2010), compensation for farmers and a Restructuring Fund, financed by sugar producers, to encourage uncompetitive sugar producers to leave the industry. In the context of the financial and economic crisis, the Commission decided on 13 February to allow Member States to advance the payment of 100 percent of the 2008/2009 restructuring aid to June 2009. Several Member States already announced that they will use this possibility to alleviate the financial strain encountered by sugar companies.

Last March and October, the Commission concluded that there was no need to impose an obligatory withdrawal of sugar for the current marketing year 2008/09 since EU sugar market was healthy. An early assessment for 2009/10, leads Commissioner Boel to the conclusion that a preventive withdrawal is not necessary on this occasion either. In February 2010, the situation will again be reviewed to see whether there is a need for "preventive withdrawal" for the marketing year 2010/2011 or a "final cut" i.e. a further reduction of quota.

Source: MEUSAC Competitiveness and Consumer Affairs Committee Sectoral Committee

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