Sugar production cut

LONDON – European Union 2006/07 sugar production is expected to drop at least 20 percent from a year ago due to price-slashing reforms and dry weather, but higher output outside the bloc will more than make up the shortfall. The International Sugar Organization (ISO) predicted a decline in EU sugar output of more than 20 percent to 17.1 million tons, while German analyst F.O. Licht forecast a 25 percent fall year-on-year to 16.4 million tons. Sergey Gudoshnikov, a senior economist at the London-based ISO, said yesterday that a combination of sweeping EU sugar regime reforms and hot, dry weather led to the sharp fall but higher output outside the bloc would more than fill the gap. «All of the beet tests are worse than last year. There was a late spring. Yields are down because the vegetative period is shorter,» he told Reuters. «The EU beet harvest will not be a disaster but it will be lower than last year,» he added. At the November 2005 meeting of the EU Agricultural and Fisheries Council, political agreement was reached on wide-ranging reform of the subsidized EU sugar regime. A key element of this was a 36 percent cut in the guaranteed price for white sugar. Analysts said a surge in sugar prices in 2005 and in early 2006 to a 25-year high had led growers around the world to increase sugar plantings, boosting supplies. The decline in EU production would be more than offset by increases in output in key producers, such as Brazil, Thailand and India, they said. Several analysts and traders now talk of a 2006/07 global sugar surplus of 6-7 million tons. The ISO has forecast a 2.2 million ton surplus, Paris-based sugar consultancy Societe J. Kingsman has predicted a 3.3 million ton surplus, and London-based merchant Czarnikow has said it foresees a 3.1 million ton surplus. Licht said that following EU sugar reform, the largest decline in EU sugar output in 2006/07 would occur in Italy. The European Commission reckons that throughout the EU, 60 factories will have to shut entailing the loss of 80,000 jobs, it added.