Rabobank Reports Best Placed EU Suppliers Under Deregulated Sugar Regime
Scenario analysis by FAR suggests that companies are likely to face a more open, competitive and possibly quota-free environment post-2015, requiring them to evaluate their strategic options under such conditions.
Oct 26 2011 -- AB Sugar, Tereos and Suedzucker AG are among the companies “best positioned for further deregulation of the EU sugar regime,” Rabobank International has reported. The European Commission, wants to abolish limits on domestic sugar production following a shortage of the sweetener in the EU this year. Sugar quotas would expire on Sept. 30, 2015, under the commission’s proposals.
Though as yet uncertain, the implications for industry players of further policy change post-2015 are likely to be profound. Scenario analysis by FAR suggests that companies are likely to face a more open, competitive and possibly quota-free environment post-2015, requiring them to evaluate their strategic options under such conditions.
AB Sugar is the only EU producer which has large operations in a number of African countries, some of which are preferential suppliers to the EU. Tereos is the only EU producer with operations in Brazil, producing both cane sugar and ethanol and has access to cane sugar. Suedzucker has no cane sugar operations, but has a strong supply agreement with Mauritius, a major preferential supplier of sugar to the EU, and through the 25 percent minority stake it recently acquired in ED%F Man, one of the world’s leading interantional sugar traders. These three companies have operations in efficient beet-producing regions and enjoy considerable economies of scale in processing and marketing. They also have captive cane sugar supplies, refining capacity and/or strong sourcing and tarding expertise, accoridng to a new FAR report.
The report notes that the European Union’s sugar market is going through a period of unprecedented volatility resulting from the combination of rising global sugar prices coupled with the consequences of the recent restructuring and downsizing of EU sugar production.
Further challenges lie ahead, since the EU’s current sugar regime is officially in place until September 2015. The debate on the extent to which policy may change again as of this date has just begun in earnest with the recent release of an EU Commission proposal on sugar policy post-2015.
Source: Rabobank
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