Commission analysis of the international sugar situation
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CTA. 2003. Commission analysis of the international sugar situation. Agritrade, December 2003. CTA, Wageningen, The Netherlands.
Permanent link to this item: http://hdl.handle.net/10568/52830
In September 2003 the European Commission released a document...
In September 2003 the European Commission released a document describing the international situation in the sugar market. This document provides a comprehensive review of the international context in which the EU is reviewing its options for sugar-sector reform. Sugar is only moderately important within EU agriculture, accounting for 1.4% of the utilised agricultural area, between 1.6 and 1.8% of EU agricultural output; between 2% and 3.5% of agri-food product exports and providing a livelihood for 230,000 farms. Sugar beet however accounts for only 10% of the land use on these holdings on average, although farmers achieve a better income from sugar beet than from most other crops. EU production varies between 15 million and 18 million tonnes refined equivalent. With EU enlargement the area under sugar within the EU is likely to increase by 30% and sugar production by 15%. However, certain EU member states and some regions, are more dependent on sugar than others. Germany and France account for more than half the EU-15 sugar production, and Italy and the UK about 8% each. The EU is a net exporter of sugar, with exports amounting to around 5.3 million tonnes and imports to 1.8 million tonnes, making it a 'key player on the world sugar markets'. The paper notes that the EU accounts for 13% of world production, 12% of world consumption, 15% of global exports and 5% of global imports. Since 1996 Brazil and Indian have competed with the EU as the world's leading sugar producer, and Brazil now dominates global exports with around a quarter of the market, while the EU has fallen to second place. The global sugar trade represents about 30% of world production which means that international prices are very important to low-cost sugar exporters. Since 1995 these sugar prices have been on a downward trend, which is largely accounted for by the excess stocks now being held which are equivalent to about a half of global consumption. Within this trend there is considerable price volatility, arising from inflexibility in production, the close link between sugar prices and world oil prices and the concentration of sugar exports on a limited number of countries, with Brazil, the EU, Australia, Thailand and Cuba accounting for 70% of world exports. White sugar prices are less prone to volatility then raw sugar prices. The OECD's 2003 Agricultural Outlook forecast international sugar prices for 2008/09 at around € 172 per tonne a 13% decline on the average over the period 1997/98-2001/02. This poor market situation is predicated on 'increasing sugar supplies and exports from low-cost producers as well as continuing high support and protection in many OECD countries'. Comment: The different relative importance of sugar to ACP economies compared to sugar's place within EU agriculture is well illustrated by the situation of Swaziland, where it accounts for 65% of income generated in the agricultural sector, the vast majority of export earnings and provides the basis for a major component of manufacturing value added. The EU's position on global markets needs to be seen in the context of EU prices that are three times the world market price, and average production costs that are about twice the world market price. The EU's major position in the global sugar trade is therefore something of an anomaly. This is a result of the EU sugar regime which means that EU production is not dependent on the international price of sugar. Indeed, 'C' production which has to be exported without export refunds has reached unprecedented high levels despite the low international sugar prices of recent years. If international prices are to recover and provide some insulation against the income losses ACP states will face as a result of EU sugar-sector reform then the EU is going to have to design reforms in ways which bring about an end to EU 'C' sugar exports. This should ease the international market situation somewhat and support the price. Given the lower volatility of white sugar prices, low-cost ACP producers may find certain advantages could be gained by increasing their production and developing regional markets for white sugar. This however will require the formulation of trade regimes which prevent low-priced EU refined white sugar from dominating these markets. EU sugar-sector reform could even create opportunities for white sugar exports in certain regions of the world such as north Africa and the Middle East.