April 17 (Bloomberg) -- The European Union must guarantee sugar supplies for the bloc’s refiners after quotas end because the cost of importing raw sweetener from preferential countries is at a 10-month high, according to Tate & Lyle Sugars.
Quotas that cap the amount of sugar local producers can sell in the EU will end as part of Common Agricultural Policy reform. The European Commission, the EU’s regulatory arm, proposed ending the system in 2015 while the EU Council and Parliament want them ended by 2017 or 2020. Refiners importing raw sugar from nations with preferential access paid the most since March 2012 in January, commission data show.
“If the quotas are going to be eliminated, then that will free up and permit the isoglucose and beet sectors to produce and to sell as much quantity as they wish,” Tony Bennett, government affairs and strategy manager at Tate & Lyle, said in a telephone interview from London yesterday. There needs to be “some kind of mechanism to allow the cane refiners to compete with fully liberalized beet and isoglucose sectors.”
Tate & Lyle Sugars is owned by American Sugar Refining Inc., and operates London’s sugar refinery on the Thames River. It’s no longer related to London-based Tate & Lyle Plc, the maker of low-calorie sweetener Splenda.
Sugar producers in the EU can only sell a limited amount of their output in the domestic market, with the rest being put to non-food use or exported. That leaves part of the bloc’s consumption to be met by imports from some least developed countries and nations in the African, Caribbean and Pacific group of states, known as LDC and ACP countries.
Raw sugar imports from ACP nations cost an average 620 euros ($817) a metric ton in January, according to the commission. That was the second-highest price since at least 2006 and 63 percent above the average of the white sugar futures traded on the NYSE Liffe exchange in London that month.
Shortages of sugar in the EU emerged three years ago as supplies from preferential nations fell below the commission’s forecast. The EU sugar price climbed to 738 euros a ton in January, the highest since at least 2006, data from the commission showed. In February, it fell to 725 euros a ton.
“The ACP, LCD countries account for less than 5 percent of the world trade,” Bennett said before the Kingsman EU Seminar in Geneva tomorrow. “So to continue to limit us to their supply volume wouldn’t be giving a parallel treatment.”
Sugar refiners in the EU want the bloc to guarantee that they will have enough supplies to be able to compete after quotas end, Bennett said. While the preference would still be given to ACP and LDC nations, the EU must allow imports from elsewhere in case these countries cannot fulfill refiner needs, he said. A mechanism on how to do this has not yet been defined and will be discussed at a meeting of the Brussels-based European Sugar Refiners’ Association today, he said.
“The current harvest of beets more than exceeds the total consumption of sugar in the EU,” Bennett said. “If you liberalize completely the isoglucose and the beet sectors and you don’t liberalize the cane refiners, the imports will reduce dramatically.”
Producing sugar in Northwest Europe is cheaper than in some nations that have preferential agreements with the EU, Bennett said. The cost of making a ton of sugar in Holland, France, Belgium and the U.K. is “significantly lower,” he said.
The European Commission will probably need to take additional measures to supply the local market with more sugar again in the 2013-14 season that will start in October even as imports from preferential countries have started to climb this season, according to Bennett.
“Clearly the regime that we are currently in was designed on the expectation of significantly more imports from the APC and LDC countries than have actually come,” Bennett said. “I’m sure they will be bringing some volume into the market. How much? I’d say probably more than 500,000 tons.”
The commission said it will allow additional supplies of 1.2 million tons in the bloc this season by importing and allowing local producers to sell more in the domestic market. Additional supplies next season will depend on the market situation, said Roger Waite, a spokesman for the commission.
“The commission has the role to manage the market and that’s what we will do,” Waite said by phone from Brussels yesterday. “We would prefer if it wasn’t someone in Brussels that had to decide how much sugar is placed in the market, but under current rules, that’s the role the commission has.”
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