EU reform bad news for beet farmers

BEET growers will be offered compensation for only 50 to 60% of their losses, in a proposed reform of the EU's sugar subsidy regime.

Leaked details of Commissioner Franz Fischler's reform proposals indicate he will look for a one third cut in the guaranteed EU sugar price between 2005 and 2007, reducing sugar quotas from 17.4 million to 14.6 million tonnes a year, and cutting subsidised sugar export levels from 2.4m tonnes a year to 400,000 tonnes.

Industry observers say these plans would end sugar production in many European regions. For the first time, it is proposed that farmers will be allowed to freely trade their beet quotas.

If approved, this proposal is likely to shift production to the most competitive beet growing areas, such as northern Germany, the Paris basin and Britain.

Non-competitive sugar growing areas in southern Europe, Finland and some eastern European regions would most likely see production disappear.

For Ireland's 3,750 beet growers and the Irish Sugar division of Greencore plc, the proposals deliver a threat long feared by the European sugar industry, which has long benefited from Brussels subsidising artificially high prices and setting production quotas, while also paying export subsidies to EU local producers and using high tariffs to block cheap sugar imports.

Commissioner Fischler is sure to face a tough battle with Europe's powerful sugar lobby and with many member states when he presents his proposals, expected later this month.

In the next steps, the proposals will have to be confirmed by other Commissioners and later go for approval by member states's Agriculture Ministers.

Opponents of the sugar regime have pointed out that the EU spends €3.30 in subsidies for every euro worth of sugar it exports, and sugar is three times dearer in the EU than on the world market.

The EU is also under pressure from the World Trade Organisation to change the current system.

The reform proposals would also inflict severe economic hardship on developing countries such as Mauritius and the Fiji islands, which export sugar to the EU and benefit from high guaranteed prices.

But the plan to drive down prices will be welcomed by European consumers and the sugar-consuming industries.