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EU May Cut Grain, Sugar Import Barriers on Price Hit

Feb. 11 (Bloomberg) -- The European Union is considering easing import barriers for feed grains and sugar as livestock breeders and food producers in the bloc face shortages and surging prices.

The bloc’s agriculture committee met in Brussels yesterday to discuss grain and sugar, and the European Commission said it will work on a proposal to suspend some cereal-import duties in response to “tight supplies” on the world grain markets. Food prices rose to a record in January, according to the United Nations, with grains up 44 percent in the past year and sugar 12 percent higher at a record.

“What we’re seeing is exceptional circumstances on the world market,” Roger Waite, a spokesman for the commission, the EU’s regulatory arm, said today.

The goal of reducing grain-import duties would be to “help facilitate feed cereals imports from outside the EU and so to reduce tensions on the European markets,” the commission said.

“The tightness is very much in the feed sector,” Waite said. “Producers have had enormous problems because feed prices are so high and their profit margins have been squeezed.”

Higher grain prices are mainly hurting livestock breeders, who face an “enormous increase” in costs that they’re unable to pass on to end users, according to Jan Bolhuis, who follows agricultural markets at Dutch researcher LEI, a unit of Wageningen University.

‘Vital’ Calls

The commission’s proposal relates to feed wheat and barley, while corn is not being discussed for now, according to Waite. The EU is responding to calls from the feed industry that it is “vital” to address the issue, he said.

“At the moment feed prices are really high and we’re concerned about the pig meat market in particular,” said Amanda Cheesley, a spokeswoman at European farmers’ organization Copa-Cogeca. “Feed prices are a big part of input costs.”

The European Commission yesterday also proposed to allow more sugar imports and the sale of so-called out-of-quota sweetener on the domestic market to ease supply shortages, according to a person familiar with the proposals.

Scrap Levy

Under EU rules, local sugar producers can sell a limited quantity for food use in the 27-nation bloc. The commission is proposing to scrap a levy on 500,000 metric tons of out-of-quota sugar and allow it to be sold in the EU, according to the person, who declined to be identified because the proposal isn’t public.

The commission, in a meeting with member states yesterday, also proposed a tender system that would allow for additional sugar imports, the person said.

Within the sugar industry there are “serious price concerns,” and refiners in Portugal had “problems of supply” in January, Waite said. The commission said yesterday it discussed two “informal working documents” on the state of the bloc’s sugar market.

“We face huge supply problems in the EU since summer last year,” Muriel Korter, secretary general of the Committee of European Users of Sugar, or CIUS, said in an e-mailed reply to questions. “We believe that the commission is not managing the market accurately.”

Data Questions

The Brussels-based sugar-users organization, whose members include Coca-Cola Co. and Unilever, questions the EU’s market-data collection, import expectations and estimates and its price-communication mechanism, Korter said.

Sugar users “are desperate for cheaper sugar,” Waite said. The commission’s goal for sugar market measures would be “just to provide extra volume to stop the market from overheating,” he said.

EU sugar stocks for food use in the domestic market may tumble to a “historical low” of about 500,000 tons at the end of September, according to Sucden, the trading arm of Sucres et Denrees SA.

The EU’s overhaul of its sugar industry has resulted in a “sharp decrease” in production of sweetener from sugar beets that hasn’t been compensated by a sufficient rise in imports, Sucden said in a report yesterday.

Least-developed countries, which benefit from duty-free imports into the EU, have been opting to sell sugar on the world market rather than to the bloc, Waite said, which he said is “exceptional.” Import duties from countries other than those on the least-developed list make shipments “prohibitively expensive” under current rules, he said.

Any EU measures to cut import tariffs may have a limited effect on grain and sugar prices in the bloc, according to Bolhuis at LEI.

“Grain and sugar are not EU problems, they’re global problems so we’re not going to solve it here,” Bolhuis said.

To contact the reporter on this story: Rudy Ruitenberg in Paris at rruitenberg@bloomberg.net.

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

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