Gábor Zsugyelik

ISO Council SessionIstanbul23 May April 2006

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The impact of the new EU Sugar Regime on the various stake holders Reform objectives Main instruments Restructuring fund Impact on stake holders

– In the EU– Outside the EU

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REFORM – objectives & timing Improve competitiveness & market orientation Create a sustainable market balance in consistency

with the EU’s international commitments Bring the sugar regime in line with the CAP reform

process Long-term policy framework (2014/2015) Budget neutrality Entry into force 1 July 2006; 4 years of transition Marketing year 1 October / 30 September

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REFORM – major instruments 1 Intervention price reference price Limited intervention until 2009/2010 Private storage Price cut : 36% over 4 years White sugar reference price : 404.4 €/t Raw sugar reference price : 335.2 €/t Minimum sugar beet price : 26.3 €/t Compensation for growers (decoupled)

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REFORM – major instruments 2 Quotas merged Out-of-quota production : specific destinations « Super Levy » 1.1 Mt additional domestic quota can be purchased Isoglucose quota increased by 300 000 t Compulsory quota cut at end of transition -if needed Carry forward out-of-quota sugar Withdrawal of quota sugar (annual measure)

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Expected impact of the reform on the EU sugar balance 1.

Current situation:– Production: 19-20 Mt– Consumption: 16 Mt– Imports: 2.0 Mt– Exports: 5-6 Mt (2.5 Mt with refund)– Quota: 17.4 Mt

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Expected impact of the reform on the EU sugar balance 2.

Situation after reform:– Production: 12-13 Mt– Consumption: 16 Mt– Imports: 3.5-4.0 Mt– Exports: 0-1.0 Mt

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Why restructuring fund?

Avoid obligatory linear quota cut Quota transfer between MS rejected Accelerate restructuring of the sector Financial incentives to leave No EU money involved – 100% self-funding Funded by levy paid on quota

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REFORM – restructuring fund Incentive to less competitive producers to

leave sector Provide resources to cope with

consequences of factory closure Aid : 730 €/t, 730 €/t, 625 €/t, 520 €/t Levy : 126.4€/t, 173.8 €/t, 113.3 €/t At least 10% of the aid reserved for growers Commission report by 2008

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Expected effects of R.Fund

3-5 mio t renounced Lower EU output: only under quota Concentration of sugar production in more

competitive regions (Reduction of inulin syrup production)

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Effects on EU beet growers

If competitive: lower price + decoupled compensation

New outlet: beet growing for bioethanol

(inspired by Brazil) Switch to other crops

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Effects on EU sugar producers

Concentration &/or reduction of capacity « C » sugar capacity cut or look for EU

market In case of closure:

– transfer into refiner– transfer into biofuel plant– total dismantling

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Export possibilities

Quota sugar with/without refunds (Art 32) Part of withdrawn sugar (Art 19) Out-of-quota sugar - Art 12(d)Total EU exports shall not exceed the Community‘sWTO limits of 1.3 Mt and 513 M€ (minimal increase).

Role of export refund expected to decline.

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Effects on world market

Increasing (temporarily ?) WM prices– Higher self-sufficiency of importers

Higher market volatility (speculation) Gap to be filled:

– Destination refiners (BRA raw sugar)– White exports from BRA/India/other?– EU becomes net importer

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Impact on ACP and LDC EU committed to purchase 1.3 Mt ACP

sugar EU sugar market free from 2009 for LDC System of guaranteed price kept Significant amounts of compensation Higher WM + lower EU prices might divert

exports to other destinations EU price now only 50-60% higher than WM

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Conclusions

Significant drop of EU production + exports EU to become net importer Concentration on EU sugar industry Higher WM prices and volatility Maintained (ACP) + improved (LDC) market

access to the EU

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THANK YOU FOR YOUR ATTENTION!

TEŞEKKÜR!