ECONOMY

EU facing 2007-2008 sugar surplus, may apply quota cut

BRUSSELS – EU sugar industries have sold back just over 700,000 tons in national production quotas as agreed under the bloc’s policy reform but are unlikely to avoid a one-off cut to 2007-08 allowances, officials said yesterday. For the first year of the reform, which started in July 2006, industries sold nearly 1.5 million tons of quota back to Brussels at a rate of -730 per ton, above the 1 million that the European Commission had expected. The figures also include isoglucose and inulin quotas. But the second year, where the same buyback rate applies, the degree of quota surrender has been worryingly low – the deadline for applications is January 31 – and then rates fall to -625 for 2008-09, followed by -520 in 2009-10. So far, the 2007-08 quota sold back to Brussels stands at around 708,000 tons. Countries that have offered the highest volumes have been Greece, Hungary and the Czech Republic. EU Agriculture Commissioner Mariann Fischer Boel has repeatedly warned sugar operations that are unable to produce at around -400/ton that they should leave the sector now and take the EU’s highest buyback rate while they still can. «We don’t see any signal of a major increase. It’s a pity, because the rate of aid goes down next year so if people want to get out (of the sector) they should have done it now,» one Commission official said. The Commission had originally wanted to see up to 4 million tons of EU production quota removed from the market. Under the EU’s sugar reform, agreed in 2005, a four-year buyout scheme is available for industries wishing to leave the sector. Reconsidering quota reduction So the next step, Commission insiders say, could well be a compulsory market withdrawal, or quota reduction, that would be applied across the bloc. This was requested by Austria and Germany at last month’s meeting of EU agriculture ministers. At the time, Fischer Boel rejected the idea, saying there was no legal basis to act in such a way. Now, the Commission is believed to be reconsidering. «There is a danger that we could have too much sugar next year,» the official said. Cutting quotas, Fischer Boel said last month, would be a damaging way to proceed since it would affect all EU sugar-producing countries. But she said she would not hesitate to do so. In November, Fischer Boel said the EU could see an unwanted surplus of 4.5 million tons of sugar – 25 percent of the entire year’s production quota – in 2007-08, based on a quota surrender volume of 700,000 tons. The Commission wants 6 million tons of quota surrendered by national industries by the end of the four years of the so-called restructuring scheme. At present, subsidy-eligible quotas are allocated to individual EU countries each year.