Commission Proposes to Allow Resale of Intervention Sugar for Export

Prior to the sugar reform, 1.878 million tonnes were bought into intervention in 12 Member States. The tenders for the resale of the intervention sugar stocks proved to be very successful and 1 million tonnes were sold back onto the Community market.

08/12/06 The sugar management committee has on a European Commission Regulation to allow the resale of remaining intervention sugar stocks for export. Following the vote, the measure is expected to be adopted by the Commission in the coming days. The new regulation is designed to help clear remaining stocks of intervention sugar, for which the monthly storage costs are very high. The current market situation presents a good opportunity to do this. The European Union needs to make use of its export rights as allowed by the World Trade Organisation. However, the EU only has a limited budget for export refunds, as following the reform, which came into force on 1 July 2006, a large part of the budget is now being spent on compensation to farmers for the sugar price cut.

Unlike some sectors, intervention has rarely been used in the case of sugar. However, from March 2005, large quantities were offered into intervention. Prior to the sugar reform, 1.878 million tonnes were bought into intervention in 12 Member States. The tenders for the resale of the intervention sugar stocks proved to be very successful and 1 million tonnes were sold back onto the Community market. The remaining intervention sugar stocks totalled 855,000 tonnes as of 5 December 2006.

With the arrival on the Community market of the "fresh sugar" produced in the 2006/07 marketing year, the interest in buying intervention sugar has declined and it is not expected that demand for intervention sugar will increase in the short term.

However, such sugar has to be stored at public expense and the monthly costs to be financed from the Community budget are substantial. In addition to the costs connected to stocks, there is also a risk of quality degradation which could considerably increase the overall expense.

The budget planned for sugar refunds for 2007 was reduced in view of the sugar reform as the money previously used for export subsidies is to be used for the compensation of sugar beet growers.

In order to use the (subsidised) export possibilities allowed by the WTO (1,374,000 tonnes may be exported every year with export refunds), it is intended to offer intervention stocks for export. The resale of intervention sugar for export will not limit the possibilities of Community sugar exporters. In fact, it will help to make full use of the available quantitative WTO ceiling (N.B. This figure is substantially lower than in previous years because of the decision of the EU to comply with the ruling of a WTO Panel).

Despite the opening of an invitation to tender for the resale of intervention sugar stocks for export, both the "free market" export tender and the tender for resale on the Community market will continue to apply.

There is a fixed sales price for intervention sugar of €632/tonne in the opening tender. The tenderer submits a bid, with the intervention lot(s), quantities concerned and an amount of export refund. During the sugar management committee, a decision is made on the maximum refund. A successful tenderer then buys the intervention lot(s) concerned at this fixed price, needs to fulfil all obligations for the removal of the sugar and has the right to an export licence for the quantity for which the export refund is awarded. There is no obligation to export the intervention sugar itself. The operator can export by equivalence.