Sugar prices in the European Union, the world’s largest importer, are unlikely to fall for now because of import duties and rising prices from traditional suppliers, according to Tate & Lyle Sugars.
Prices reached 728 euros ($952) a metric ton in November, the highest since at least 2006, figures from the European Commission showed. They probably will remain elevated in the “short term” even after the commission said it will boost supplies by 1.2 million metric tons this season, Tony Bennett, government affairs and strategy manager at Tate & Lyle, said in an interview in Brussels today.
The EU is adding supply by letting producers sell more sugar domestically and importing at reduced duty under a tender system. The levy charged in past tenders approached the 339 euros a ton normally imposed on imports for refining, Bennett said. High duties paid at tenders prompted countries that usually supply the 27-nation EU to raise their prices, according to Tate & Lyle.
“These tenders are coming about, and these tenders are high-duty,” Bennett said. Traditional suppliers to the EU “are aware that they can charge an extremely high price for the sugar they have on the back of the fact that they see how much we are prepared to pay the commission for import licenses.”
Certain nations in the African, Caribbean and Pacific Group of States and some least developed countries have preferential access to the EU, meaning their sugar is free from import duty. Shipments from those nations that were lower than predicted by the commission, the EU’s executive arm, led to local shortages of the sweetener in the bloc.
The additional 1.2 million tons proposed by the EU may help reduce prices next season, depending on how much reaches the market and at what duty, Bennett said. For now, the commission has allowed imports of 54,000 tons of raw sugar and 8,540 tons of the refined, or white, variety under the plan as well as authorizing local producers to sell an additional 150,000 tons in the domestic market. Any potential impact of the extra sugar can only be felt in the following year because supply contracts in Europe are usually signed on an annual basis, Bennett said.
Tate & Lyle is arguing for equal treatment for European sugar-beet producers and refiners, according to Bennett. If the EU were to end sugar quotas, ideally it also would scrap import duties, he said. If the quotas stay, the commission would have to be able to guarantee raw-sugar supply for refiners, he said.
Tate & Lyle had a loss of 41 million euros in the 2010-11 season, Bennett said. The company is owned by American Sugar Refining Inc., which bought Tate & Lyle Plc’s European sugar activities in 2010.
The commission has proposed ending sugar quotas that limit production in 2015 and the European Parliament’s agricultural committee wants to extend the current system to 2020. While quotas may end, import duties will remain in place, Joao Pacheco, the commission’s deputy director general for agriculture and rural development, said today in a separate interview in Brussels.
“For us, it’s important that the quotas end because they are very rigid,” Pacheco said. “We believe they are a thing of the past, and it doesn’t make sense that sugar will be the only market left with quotas in the EU. Milk and wine quotas will end, so it doesn’t make sense that sugar will be the dinosaur that stays. We will have to reach a compromise that will probably be a date for sugar quotas to end.”