Rabobank’s report, ‘New Realities for the EU Sugar Industry’, outlines expectations for the European sugar market after the EU’s sugar policy is revised in 2015.
The report said the most likely policy change would be a replacement of market tools such as quotas and price controls with perhaps direct payments subsidising European farmers, which would allow markets to operate more freely.
Maya Donceva, senior associate for food ingredients and sugar at Rabobank, told BakeryAndSnacks.com that this could be the best outcome for bakery and confectionery manufacturers reliant on a consistent sugar supply.
“For buyers this is the best scenario as they want sugar at the best possible price,” she said.
Earlier this month, the European Commission revealed in a publication outlining the future agriculture policy for the 27 member states, that sugar quotas should expire on 30 September 2015. The quotas currently restrict the amount of sugar that can be produced for the EU’s domestic market.
In August, the world’s biggest food producer Nestle called for significant changes to the EU sugar regime including the phasing out of sugar quotas by 2015.
Donceva warned that the changes could come later than 2015 and would need backing from EU Parliament. Changes would also be implemented gradually over around five years, the report predicts.
It said that this scenario would lead to a highly competitive market and only the most diversified producers like AB sugar, Tereos and Sudzucker would be able to to maintain their market position and further increase their EU market share.
It added that new players could enter the EU, such as American Sugar Refineries and leading Brazilian and Asian producers if deregulation becomes a reality.
In the meantime, bakery and confectionery manufacturers can expect to pay high prices for sugar because of continued fallout from EU sugar policy restructuring from 2006 to 2009 coinciding with high global prices, she said.
Donceva said that bakery manufacturers buying domestic sugar were paying around €538 in June on average. Although sugar buyers looking to import sugar outside EU and preferential partners had to pay around €815 per tonne in recent months. Some buyers have reported lack of sugar availability from preferential partners and the measures of EU commission came too late, she said.
The past 18 months have been particularly challenging in terms of sugar supply in the bloc, with world market prices above EU levels for the first time, and sugar exports from emerging nations, normally imported into the EU duty-free, diverted to the world market to benefit from those more attractive prices.
Since late 2010, the European Commission has introduced a series of measures to combat this trend, which included removing quotas on imports and holding tenders for sugar imports on reduced duty.
More recently, the Commission has closed 300,000 tonnes of sugar imports for refining purposes and over 50,000 tonnes of white sugar.
The report said that this will mean that EU buyers will continue to pay a competitive global sugar price plus the freight cost to ensure supply.