EU May Need to Boost Sugar Supply Until 2020 If Quotas Extended

The European Union, the world’s largest sugar importer, will need to take steps to supply the bloc with more sugar until 2020 if the current system of quotas that limit domestic sales isn’t changed, sugar users said.

Measures to provide at least 500,000 metric tons of extra sugar a year will be needed if the quota system is maintained, said Robert Guichard, president of the Committee of European Sugar Users, which represents 15 companies including The Coca- Cola Co., Nestle SA (NESN) and Mars Inc. This season, the European Commission, the EU’s regulatory arm, took measures to supply 1.2 million tons more sugar in the bloc because of shortages and record prices.

The European Parliament’s agriculture committee voted today to extend the sugar quotas through September 2020, Jan Jakubov, a press officer for the Parliament, said by e-mail. Beet growers welcomed the decision. The existing quota system limits the amount of sugar local producers can sell in the EU, leaving part of the domestic consumption to be met by imports.

“This year it’s the third time that the commission is taking exceptional measures,” Guichard said by phone from Paris today. “I do expect a minimum of half a million tons missing or even more, depending on imports.” Guichard is procurement manager for Mondelez International Inc. (MDLZ), maker of Oreo cookies, and said he was only speaking on behalf of the sugar users group.

Shortages Emerged

Shortages of sugar emerged after imports from countries that have preferential access to the EU market fell short of the commission’s estimates. Sugar from a group of least developed countries and some nations in the African, Caribbean and Pacific group of states does not incur an import duty in the EU. The raw sweetener from other countries incurs a levy of 339 euros ($451) a ton, while the duty imposed on imports of the white variety is 419 euros a ton, according to Roger Waite, a spokesman for the commission in Brussels.

“If the world market price is high, the preferential countries may decide to deliver somewhere else,” Guichard said. “The quota is only 80 percent of the consumption and 20 percent have to be imported. If they don’t export to Europe, we are in trouble.”

The EU, once the second-biggest sugar exporter, has been shrinking the sugar industry since 2006 after the World Trade Organization ruled it was dumping subsidized supply on world markets. After the reform, the bloc became a net importer and dependent on supplies from preferential countries.

The International Confederation of European Beet Growers said extending the quotas will help achieve a balanced sugar market and allow beet growers to be competitive.

Sugar shortages drove prices in the European Union to a record 728 euros a ton in November, data from the commission showed. That is 88 percent more than the average price for the sweetener traded on NSYE Liffe in London that month.

“We are worried that this is very bad for the small and medium food industry,” Guichard said.

The EU will be the largest sugar importer in 2012-13 at 3.85 million tons, according to the U.S. Department of Agriculture.

To contact the reporter on this story: Isis Almeida in London at ialmeida3@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

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