Sweet sorrow as Europe bursts inflated sugar subsidy bubble

Soft drink, confectionery, cake and biscuit manufacturers have welcomed proposals to reform the sugar regime put forward by the European Commission (EC).

As part of Common Agricultural Policy (CAP) reform, the EC plans to gradually remove subsidies which keep European Union (EU) sugar prices three times higher than the world market's. But European sugar producers have warned that they face reduced profits and job losses as a result.

The EC has proposed a 33% reduction in the sugar price, a 37% reduction in the beet price and a 15% reduction in the sugar quota between 2005-08. It also plans to abolish production levies. The reforms are scheduled to take effect from July 2005.

The EC also proposed to allow countries to sell back quotas to the EU and to give 60% compensation to sugar beet growers.

Jill Ardagh, director general of the British Soft Drinks Association and a member of the UK Industry Sugar Users Group (UKISUG), said: "Support prices and production quotas should be progressively abolished so that sugar can be traded competitively on a demand-led market. The gradual process of change recommended by the Committee will allow time for the market to adjust and for compensation payments to be made to any UK beet farmers affected by no longer having artificially high prices guaranteed."

The UK consumes around 2m tonnes of sugar annually and the UKISG estimates the current regime adds a cost of roughly £10 per person or £600m a year.

The Biscuit, Cake, Chocolate and Confectionery Alliance said: "The high price of sugar harms the competitive position of UK manufacturing, placing us at a competitive disadvantage within the EU and also hitting exports to third countries."

Sugar producer Danisco, meanwhile, warned that it could see profits for its sugar division cut by as much as a quarter. It also said the proposal would face stiff opposition from other EU states.

There are also concerns among beet growers as to how the compensation would be apportioned.

Meanwhile, sugar reform campaigners, such as Oxfam and the World Wide Fund for Nature, said the proposals did not go far enough to make a difference to growers in developing countries.

Napier Brown Foods has bought sugar merchant James Budgett Sugars from ED&F Man Holdings and Greencore Group for £17.5m.

The business imports refined sugars from other European Union states and raw cane sugars from elsewhere. It also has a processing and packing operation. Napier Brown said the acquisition strengthened its position ahead of changes to the sugar regime.