Sugar Producers React Positively to Less Extreme Reforms

25/11/05 Many European sugar producers have reacted positively to the EU’s sugar reforms, which were less extreme than first expected. EU agriculture ministers agreed to cut the guaranteed price for sugar by 36 pct rather than the 39 pct proposed earlier.

UK based Tate & Lyle, which was a vocal opponent of the proposals said it fully understands the need for reform of the EU sugar regime and welcomed the Agreed Proposals. It is positive for the industry as a whole that a final agreement has been reached within the agreed timetable, as is the extended period of stability until the end of September 2015 contained in the Agreed Proposals, the company said.
While the long-term impact on Tate & Lyle remains significant, the final decision to make the cut in the sugar reference price of 36% (instead of the 39% previously proposed) and to delay the implementation of the price reduction is very welcome.

Tate & Lyle said that it also welcomes the inclusion of short-term transitional aid to bring the impact on cane refiners and beet processors more closely in line, and the short-term reduction of the burden of the restructuring fund on isoglucose manufacturers. Tate & Lyle said the proposal will eliminate the negative impact on its operating results before exceptional items for the years to March 2007 and 2008 and reduce it thereafter.|

Danisco also took a positive view on the EU sugar reform compromise. Danisco said that it sees the compromise as a constructive negotiation result that will ensure the foundation for long-term planning in the sugar sector. The compromise includes:
- considerable reduction of beet and sugar prices over four years
- partial compensation for loss of income to beet growers
- reduction of sugar production through voluntary quota selling and
- major restrictions in sugar exports

“The Commission's initial proposal has been subject to some adjustments in the course of the negotiations, some of which are positive, some more negative. For instance, we consider the extended period for implementing the price reduction, which turned out to be a little less than initially proposed, as a sensible solution, whereas we see a risk in extending the period for providing the high-rate restructuring aid in the case of factory closures, as it could lead to an increasing sugar surplus on the market for a longer period”, commented Executive Vice President, Mogens Granborg, of Danisco A/S.

“It's also clear that a number of important details remain unsettled at this late stage of the reform process. We need clarification of the specific terms for exports and imports and for the production of sugar for non-food use”, he added.

Danisco said in June that they expect sugar earnings to stabilise at around DKK 600-750 million once the sugar reform has been fully implemented and that the Council's decision does not lead to any change of these expectations.

Central Europe’s leading sugar producers Agrana said that it plans to maintain present output volumes, even under the new regime. Agrana said however that it will need to take action to rationalize and optimize its costs so as to ensure its sustained competitiveness within the sugar sector. Such action will include re-examining its current production structures in Austria, Hungary, Slovakia and the Czech Republic. The company said that the appropriate decisions will be made by the end of the group’s current 2005|06 financial year.