EC plans farm policy revamp to include sugar reform

11-Oct-2011 - Last updated on 12-Oct-2011 at 12:32 GMT

The EU sugar regime is blunting firms' competitiveness, it is claimed

The future of pricing of agricultural commodities lies in the balance today as the European Commission (EC) announces plans to reform the Common Agricultural Policy, with major reform of the sugar regime expected to feature in the package.

As FoodManufacture.co.uk prepared for publication, ministers in Brussels were announcing their reform proposals. More details to follow.

Meanwhile, for weeks pressure has been building to reform the sugar regime with many food manufacturers and industry insider’s calling for wholesale changes to the system.

Firms are now losing patience with the regime which they claim is stifling competition and failing to remedy the chronic shortage of supply.

Keith Flurry, senior commodity analyst at Rabobank told FoodManufacture.co.uk: “The situation is pretty serious for the manufacturing industry. One of the problems is the current regime was designed in an era where there was an abundance of surplus. I think there has been a bit of a breakdown, which is frustrating, not just for manufacturers but everyone down the supply chain.

Backlash

“Manufacturers need a more transparent way of operating to ensure that supplies are safeguarded. People want real change and, if the EU only proposes modest changes, I think they can expect a backlash from the industry.”

A key demand of food manufacturers is for the EC to abolish beet sugar production quotas, which, it claims, is responsible for UK sugar prices rising this year to €880/t. That is an increase of 60% compared with €500 – 550/t a year ago.

Nestle described the situation as “a major issue” and said that the measures taken by EC so far had been “reactive” and had little impact.

A spokesman told FoodManufacture.co.uk: “Over the past few years the necessary imports from outside the EU have not arrived as anticipated, and bad weather in some sugar producing countries have affected yields. In addition, the Common Agricultural Policy sugar reform has been based on the assumption that world sugar prices would remain lower than prices in the EU which has not been the case. Consequently, the EU sugar market is not functioning as foreseen.

Phase out

“Significant changes are required to bring sufficient transparency and fair conditions to the market. As such, the EU reform should phase out sugar production quota as of 2015.”

Reflecting its strength of feeling on sugar reform, Tate & Lyle Sugar’s has taken the commission to court over the issue. It is seeking €35M in recompense for the money it claims to have lost due to tariffs on sugar imports.

The firm argues that the EC’s policy supports high prices, damages the sugar cane industry and unfairly favours domestic beet producers.

A spokesman for the firm told Food Manufacture.co.uk: “It is becoming increasingly urgent that this is addressed. The impact this is having on manufacturers is massive as it pushes up prices, something that is ultimately passed on to consumers.

“If Europe wants food security then it is clear that we need a level playing field on which we can compete.”