Sugar Semi-annual 2012

An Expert's View about Vegetables and Melons, Roots and Tubers in France

Posted on: 21 Oct 2012

EU sugar production for MY 2012/13 is forecast to decrease by 10 percent to 16.4 MMT from 18.3 MMT in MY 2011/12.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 10/2/2012 GAIN Report Number: E70035 EU-27 Sugar Semi-annual Report Approved By: Cynthia Guven Prepared By: Yvan Polet Report Highlights: EU sugar production for MY 2012/13 is forecast to decrease by 10 percent to 16.4 MMT from 18.3 MMT in MY 2011/12. This decrease is caused by unfavorable beet growing conditions and despite a slight increase in beet acreage. EU sugar imports in MY 2011/12 are expected to end at 3.8 MMT and are forecast to marginally increase further in MY 2012/13. The forecast for refined imports is increased to historical levels due to exceptional measures in MY 2011/12 and a decline in price differential between the EU and global markets. EU sugar exports for MY 2012/13 are forecast to decrease to 1.5 MMT from 2.4 MMT in MY 2011/12. Executive Summary: EU sugar production for MY 2012/13 is forecast at 16.4 MMT compared to 18.3 MMT in MY 2011/12. This 10 percent decrease is due to poor growing conditions, wet and cold in northwest Europe and hot and dry in southeast Europe. Since EU member states are expected to “carry over” almost 900,000 MT of unsold out-of-quota sugar from MY 2011/12 into MY 2012/13, ending stocks are expected to return to historical levels. EU sugar imports for MY 2011/12 are estimated at 3.8 MMT despite high global prices. To ease the price of non-preferential imports, the European Commission opened 7 tenders at reduced import tariff, which resulted in almost 400,000 MT of imports. For MY 2012/13, a limited further increase is forecast. EU sugar exports for MY 2012/13 are forecast at 1.5 MMT as they are limited by the EU WTO export ceiling for sugar. MY 2011/12 exports are estimated at 2.4 MMT as exporters took advantage of unused export licenses from the 2010/11 WTO notification year. Commodities: Sugar, Centrifugal Production: The PSD forecast does not include sugar for non-food uses. This report accounts for sugar produced for the EU regulated sugar market, which includes 13.3 MMT of white sugar production that falls within Member State production quotas for food. In addition, the PSD includes sugar exports and sugar produced above the MS quota amounts that are released on the EU food market following exceptional measures, such as the ones taken by the European Commission (EC) in MY 2010/2011 and MY 2011/2012 (see previous EU sugar GAIN reports). Sugar beet production being contracted with farmers in several MS for industrial purposes like bio-ethanol production or other fermentation purposes and out of quota sugar which is intended for industrial uses is not included in the forecast. Sugar production in the EU for marketing year (MY) 2012/13 is forecast at 16.4 MMT of raw sugar equivalent (RSE). This includes 290,000 MT of cane sugar produced in French overseas territories. This is a 10-percent decrease compared to MY 2011/12, mainly as a result of lower beet yields per hectare and despite an increase in beet acreage to almost1.7 million hectares, which represents an increase of 20,000 hectares. Beet yields suffered from continued wet and cold weather during spring and summer in much of northwest Europe, which includes the main beet producing areas, while summer droughts limited beet yields in southeast European production areas. Beet sugar content is forecast to be closer to normal levels as weather improved towards the beet maturation period. EU sugar production estimates for MY 2011/12 are increased to 18.3 MMT compared to the previous estimate, including 291,000 MT of French overseas cane sugar. One reason for the change in MY 2011/12 production is that almost 900,000 MT of unsold out-of-quota sugar normally to be used for industrial purposes is expected to be carried over to the next MY and be available for food use. This is reflected in an increase of the MY 2011/12 ending inventory. This ¨carry-over¨ sugar, a system set up by the EC to balance EU sugar production shocks as a result of fluctuating yields, will add to the MY 2012/13 production. EU sugar beet production Area, thousands of Sugar beet yield in MT per Sugar content in Hectares Hectare percentage 10/11 11/12 12/13 10/11 11/12 12/13 10/11 11/12 12/13 Austria 44.9 46.4 49.3 69.8 72.1 70.0 17.25 17.80 17.50 Belgium 59.5 62.3 61.6 73.2 75.6 72.2 17.14 17.80 17.50 Denmark 39.2 39.8 41.0 65.0 72.4 63.7 17.80 18.00 18.00 Finland 14.6 14.1 14.0 38.2 38.0 36.8 16.90 16.50 16.50 France 381.0 391.0 395.9 80.3 88.0 83.0 18.10 18.50 18.50 Germany 364.0 398.0 409.3 65.1 74.6 70.9 17.27 18.00 17.90 Greece 13.4 10.0 13.0 67.8 67.8 65.0 13.28 13.50 13.50 Italy 62.2 62.2 60.0 57.1 53.1 50.0 14.96 16.61 17.00 Netherlands 70.5 73.3 73.0 74.4 79.9 81.0 16.80 17.00 16.50 Portugal 0.3 0.4 0.4 26.1 55.0 55.0 17.64 14.50 15.51 Spain 44.9 49.7 45.8 82.4 78.2 75.1 17.77 18.20 18.15 Sweden 37.9 39.6 39.0 48.7 60.2 53.5 17.10 17.50 17.50 U.K. 118.0 113.0 113.0 55.0 75.0 66.0 16.87 18.44 17.70 Czech R. 57.4 59.3 60.0 59.3 71.3 59.0 16.65 17.32 17.30 Hungary 13.8 14.4 17.3 58.0 55.0 55.0 15.04 16.00 16.00 Lithuania 15.3 17.6 19.5 46.2 55.0 51.0 16.10 16.00 15.00 Poland 200.0 203.3 207.5 51.0 61.0 60.0 16.70 17.30 17.50 Slovak R. 17.9 18.1 19.8 50.9 63.1 52.0 16.00 18.05 16.90 Romania 22.0 18.8 28.0 38.1 35.1 32.0 17.50 22.00 21.20 Total EU-15 1250.4 1299.6 1310.1 17.41 Total NMS 326.4 331.5 352.1 17.30 Total EU- 27 1576.8 1631.1 1662.2 17.40 Source: FAS Additional sugar produced out-of-quota for other uses In the absence of exceptional measures, sugar beet production beyond MS production quotas, so- called out-of-quota sugar, must be used for industrial purposes or carried over and counted towards the production quotas during the next marketing year. EU processors are expected to carry over 900,000 MT of out-of-quota sugar into MY 2012/13. This will likely result in MY 2012/13 seeing a larger amount of production available for industrial use than seen in MY 2011/12, despite the decrease in production. Any unsold amounts will need being carried over to count toward next marketing year production quotas. EU Beet Sugar Production (raw value) in ,000 MT 2010/11 2011/12 2012/13 EU Regulated Sugar Market* 15.699 18.251 16.390 Unregulated Over-Quota Production for Industrial Uses** 1.218 2.436 2.800 Total EU Beet Sugar Production 16.917 20.687 19.190 * includes within-quota production and out-of-quota production released to the EU food market, plus out-of-quota production that is exported **includes total out-of quota production, minus out-of-quota production released to the EU food market and out-of- quota production that is exported Consumption: EU domestic sugar consumption for MY 2012/13 for food is forecast at 18 MMT. As the gap between EU internal sugar prices and world prices for sugar has been closing from 2010 onwards, EU food processors, who account for over 70 percent of EU sugar for food uses, are more competitive globally and are forecast to increase sugar use. The abundance of sugar on the EU market, as a result of the 2011 record crop and EU exceptional measures, increased MY 2011/12 sugar consumption to an estimated 18 MMT. However, recent volatility in prices and import supply constraints likely prompted some commercial stock building. Trade: Imports EU sugar imports in MY 2012/13 are forecast to slightly increase to 3.9 MMT compared to 3.8 MMT in MY 2011/12. Imports of refined sugar are expected to return to normal levels as a result of higher world supplies. However, imports might exceed this volume if Colombia and Peru begin exporting sugar during MY 2012/13 if their free trade agreement (FTA) with the EU becomes operational following the ratification procedure. The forecast would also be increased for sugar imported from six Central American countries (Panama, Guatemala, Costa Rica, El Salvador, Honduras and Nicaragua), whose FTA with the EU is also going through the ratification process. Once implemented, these FTAs will grant additional duty-free TRQs for sugar totaling 264,000 MT RSE, with annual increases of 3 percent. EU sugar imports in MY 2011/2012 are estimated to finish higher than previously anticipated as sugar import tenders were opened by the Commission at reduced import tariffs in compensation for the release on the market of out-of-quota sugar to EU sugar importers who were finding it difficult to secure adequate supplies. Seven tenders during MY 2011/12 allowed the import of an additional 399,000 MT of sugar, 385,000 MT of which were raw sugar for refining by EU refiners. Supply of raw sugar was so tight that EU full time refiners paid import duties between €290 and €312.6 per MT for raw sugar under the different tenders, not much of a discount from the full EU import duty of €339/MT for raw sugar. These costly sugar imports reflect troubles with the EU sugar market functioning, because the price after refining is significantly higher than the average EU price for domestic sugar. The increased sugar imports on top of a record crop lead to a significant increase in ending stocks at the end of MY 2011/12, compared to MY 2010/2011, and closer to historical levels. The difficult situation experienced by the EU market during MY 2011/12 is also reflected in the high and volatile price level in the table below. Source: European Commission Exports EU sugar exports in MY 2012/13 are forecast at 1.5 MMT, the WTO ceiling for EU sugar exports. Sugar exports in MY 2011/2012 are estimated at around 2.4 MMT, as EU exporters benefitted from high global demand and additional export licenses granted under the MY 2010/2011 WTO notification year. The majority of EU sugar exports are traditionally to North African and Middle-Eastern destinations. Stocks: Sugar ending stocks for MY 2011/12 are estimated at slightly over 3.6 MMT, a level that is considered adequate by the EU sugar using industry compared to the tight ending inventories from the last few years. The change can be attributed to the 900,000 MT of unsold out-of-quota sugar from MY 2011/12 that is carried over into MY 2012/13. The EU sugar ending stocks nearly doubled in one year because of the exceptional measures for out-of-quota release on the domestic sugar market and the exceptional sugar import tenders. EU sugar ending stocks for MY 2012/13 are forecast at almost 4.4 MMT. This further increase results from the unsold out-of-quota sugar from MY 2011/12 being carried over into MY 2012/13. Policy: Croatia accession to the EU on schedule for July 2013 On December 9, 2011, Croatia signed its Treaty of Accession to become the twenty-eighth member of the EU. Croatia is expected to accede to the EU on July 1, 2013, following ratification by the MS. Upon accession, it is expected that the Croatia sugar TRQ for 180,000 MT under the EU Balkans agreement will cease to operate and that Croatia will be allowed to operate its own 40,000 MT sugar import quota at a reduced import duty of €98 per MT for three years. However, discussions are still ongoing about how this will be implemented since the Commission has yet to publish a proposal outlining implementing details. As Croatia will produce sugar under the EU sugar regime following accession, it negotiated a production quota of 192,877 MT of white sugar per year. The future of the EU sugar quota regime in the CAP after 2013 The debate about the planned abolition of EU sugar production quota for MS at the end of MY 2014/15 is still ongoing with sugar beet producers and processors largely in favor of an extension of the quota system at least for another five years, while EU sugar users favor the end of the quota system with or without any transition time. The decision making process for the new EU Common Agriculture Policy has largely stalled in the European Council as member states await future EU budget decisions. The discussion in the European Parliament includes a report [1] by French Member of Parliament Michel Dantin who proposes to provide an extension of the sugar quota through 2020, as well as new systems for supply management. [1] EN.pdf Production, Supply and Demand Data Statistics: Sugar, Centrifugal EU-27 2010/2011 2011/2012 2012/2013 Market Year Begin: May 2010 Market Year Begin: May 2011 Market Year Begin: May 2012 USDA Official New Post USDA Official New Post USDA Official New Post Beginning Stocks 1,433 1,433 1,939 1,974 2,495 3,637 Beet Sugar Production 15,392 15,424 17,170 17,960 15,500 16,100 Cane Sugar Production 275 275 291 291 290 290 Total Sugar Production 15,667 15,699 17,461 18,251 15,790 16,390 Raw Imports 2,522 2,525 2,650 2,550 2,600 2,600 Refined Imp.(Raw Val) 1,230 1,230 750 1,250 700 1,250 Total Imports 3,752 3,755 3,400 3,800 3,300 3,850 Total Supply 20,852 20,887 22,800 24,025 21,585 23,877 Raw Exports 4 8 5 8 5 5 Refined Exp.(Raw Val) 1,109 1,105 2,500 2,380 1,495 1,495 Total Exports 1,113 1,113 2,505 2,388 1,500 1,500 Human Dom. Consumption 17,800 17,800 17,800 18,000 17,800 18,000 Other Disappearance 0 0 0 0 0 0 Total Use 17,800 17,800 17,800 18,000 17,800 18,000 Ending Stocks 1,939 1,974 2,495 3,637 2,285 4,377 Total Distribution 20,852 20,887 22,800 24,025 21,585 23,877 1000 MT Author Defined: Notes to the reader: • In this report, all sugar is in raw sugar equivalent unless otherwise noted. • The PSD in this report only pertains to sugar as defined by HS 1701. It hence excludes sugar beet production destined for fermentation or other industrial purposes. • Conversion factors and methods used in this report: MY = marketing year; for sugar October- September Raw cane sugar = 1.07 X Refined cane sugar Raw beet sugar = 1.087 X White (refined) beet sugar • Sugar imports for EU inward processing purposes are excluded from this report’s PSD as they are entirely re-exported as processed products. Inward processing is the EU program under which the import duties for dairy, sugar, and starch containing commodities for processing and subsequent re- export are suspended.
Posted: 21 October 2012

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