EU sugar reform will not boost world market

THE EU's plan to reform sugar trading will have no effect on the world market, according to predictions from US analysts.

Craig Ruffolo at commodities research firm McKeany-Flavell said if the EU proposals were implemented it would reduce EU exports by only about two million tonnes.

"Brazil could easily make up that reduced supply on the world market without any significant effect on price," Ruffolo told the International Sweetener Symposium, sponsored by the American Sugar Alliance of growers, processors, refiners.

His assessment may disappoint third world charitable organisations like Oxfam, who are one of the fiercest opponents of the EU sugar regime mainly on grounds that it produces an export surplus of about 5m tonnes per year, destroying markets for developing-country sugar producers. European farmers will question why they are being asked to make sacrifices, for no improvement in world markets.

IFA sugar beet section chairman Jim O'Regan has estimated that farmers' earnings per tonne of beet will go from €19 in 2004 to €9.70 per tonne in 2007. Agriculture Minister Joe Walsh says the sugar proposals threaten Ireland's 1,000 jobs in processing and supply, and 3,800 farmers. However, food manufacturers generally welcome the prospect of an end to sugar in Europe trading at three times the world price.

Ruffolo predicted that world sugar prices would remain low, at 5 to 10 cents per pound, for several years. American Sugar Alliance economist Jack Roney said: "Unfortunately, the world sugar market will remain depressed, at levels barely half the world average cost of producing sugar, because of continuing subsidies not just by the EU, by a host of major sugar-producing countries. Paramount among the major exporters is Brazil, whose sugar industry has benefited from decades of cross-subsidy from Brazil's massive cane ethanol program.

"Mr Ruffolo's analysis reinforces the ASA's view that world sugar market prices will only recover through sugar policy reform among all the major sugar-exporting countries, and this can only be achieved through comprehensive, multilateral negotiations in the World Trade Organisation."