Sugar Semi-annual - EU-27

An Expert's View about Food , Beverages and Tobacco in Germany

Posted on: 13 Nov 2011

During MY 2011/12, the EU is forecast to experience a record sugar beet production, with sugar yields per hectare close to the record 2009 level. As a result, out-of-quota sugar production for EU non-food industrial use, including for bio-ethanol production, and exports is forecast at between 4 and 5 million MT. As a result, EU sugar exports in MY 2011/12 are forecast to reach 2.2 million MT, still leaving enough sugar on the EU market to replenish EU sugar stocks.

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: 10/6/2011 GAIN Report Number: E60053 EU-27 Sugar Semi-annual Report Approved By: Maurice House Prepared By: Yvan Polet Report Highlights: During MY 2011/12, the EU is forecast to experience a record sugar beet production, with sugar yields per hectare close to the record 2009 level. As a result, out-of-quota sugar production for EU non-food industrial use, including for bio-ethanol production, and exports is forecast at between 4 and 5 million MT. As a result, EU sugar exports in MY 2011/12 are forecast to reach 2.2 million MT, still leaving enough sugar on the EU market to replenish EU sugar stocks. In MY 2010/11, the EU took a wide range of emergency measures to encourage sugar imports, as high world market demand for sugar had left the EU a less attractive export destination for traditional suppliers and local shortages in sugar supplies on the EU sugar market had been reported. Executive Summary: EU sugar production in MY 2011/2012 is forecast to increase by about 2 million MT to 18.5 million MT or 13 percent compared to MY 2010/11 as a result of increased acreage by 6 percent and high sugar yields. With EU sugar yields challenging the 2009 record, the MY 2011/12 sugar production will likely exceed the MY 2009/10 production, potentially leading to more than 5 million MT of out-of-quota sugar in raw sugar equivalent. This will result in a reversal of the MY 2010/11 lower sugar supplies in the EU sugar market, which was triggered by failing imports as traditional EU sugar suppliers preferred to export to more lucrative markets than to the EU. This forced the European Commission (EC) to take a series of extra-ordinary measures to secure sugar supplies to EU sugar users, particularly the specialized sugar refiners. With the debate about the EU sugar regime raging as part of the new CAP post 2013 reform, EU sugar market stakeholders are weighing their interests following the release of a draft proposal from the EC to end the EU sugar production quota regime with a one-year transition during MY 2015/16. Commodities: Sugar, Centrifugal Production: Total EU sugar production from sugar beet for MY 2011/2012 is forecast at 18.5 million MT in raw sugar equivalent (RSE). Up to 2 million MT RSE sugar beet juice is directly fermented into biofuels, mostly bio-ethanol and some biogas produced on-farm in Germany, and therefore is not represented in the above PSD. This production level is an almost 2 million MT increase over MY 2010/11 and is the result of a six percent increase in acreage and increased sugar yields per hectare, just below the harvest 2009 record levels. Farmers increased beet acreage, mainly in France and Germany, in response to measures from the European Commission (EC) to encourage production and demand from processors. Decreased winter wheat seedings in the autumn of 2010 as a result of wet soil conditions also made this increase in sugar beet acreage possible in Northwestern Europe. The EU MY 2011/12 raw sugar production within the quota is calculated at 14.2 million MT. However, the EU could once again restore 0.5 million MT of out-of-quota sugar to within the quota, as was done in March 2011 for the MY 2010/11 sugar marketing year. As a result, EU total out of quota sugar in MY 2011/12 would amount to at least 4.3 million MT. EU sugar beet production Area, thousands of Sugar beet yield in MT per Sugar content in Hectares Hectare percentage 09/10 10/11 11/12 f 09/10 10/11 11/12 f 09/10 10/11 11/12 f Austria 43.9 44.9 47.0 70.6 69.8 70.0 17.10 17.19 17.20 Belgium 63.5 59.5 62.0 82.7 73.2 80.0 18.40 17.14 18.00 Denmark 38.5 39.2 40.0 54.5 55.0 55.0 19.60 18.00 18.00 Finland 14.8 14.6 15.0 37.7 37.0 38.0 17.20 16.50 16.50 France 374.0 381.0 391.0 89.4 80.3 88.0 19.50 17.70 18.50 Germany 364.0 362.0 394.3 71.5 65.9 71.6 18.15 17.20 18.00 Greece 21.6 21.6 10.0 67.8 67.8 67.8 13.50 13.50 13.50 Italy 60.6 62.2 50.0 54.6 57.1 56.0 15.95 14.59 15.50 Netherlands 72.4 70.5 72.0 78.9 72.6 77.0 17.70 16.80 17.70 Portugal 0.2 0.3 0.0 40.9 40.9 40.9 14.39 14.73 14.73 Spain 46.9 45.2 45.9 80.7 71.9 73.8 17.47 17.71 17.73 Sweden 39.4 37.9 40.0 60.5 55.0 55.0 17.90 17.50 17.50 U.K. 119.3 115.0 111.0 69.9 55.5 63.6 18.00 17.50 17.70 Czech R. 53.7 57.4 58.0 60.9 59.3 59.0 16.85 16.65 16.40 Hungary 14.0 13.0 13.0 52.6 58.0 55.0 15.92 15.90 16.00 Lithuania 15.1 15.0 17.0 45.1 45.0 45.0 17.50 17.50 17.50 Poland 200.0 197.0 199.0 54.3 49.1 49.5 17.00 17.10 17.10 Slovak R. 16.0 17.7 18.0 56.3 50.9 51.0 16.89 16.89 16.90 Romania 21.3 22.0 19.0 38.3 38.8 38.5 17.40 17.50 17.10 Total EU-15 1259.0 1217.8 1296.0 72.2 18.20 Total NMS 320.1 311.1 324.0 Total EU- 27 1579.0 1528.9 1620.0 69.4 18.20 f: forecast Consumption: Until 2008, EU domestic sugar consumption for food purposes has always been restricted to within- quota sugar from domestic production and imported sugar shipped under import quotas at higher guaranteed EU sugar prices. EU food processors relied on the predictable prices for their production planning for EU markets. In addition, the system allowed EU food processors to secure export subsidies, also called export refunds or restitutions, when non-EU food processors could source lower priced sugar on the world market. Since the 2007 EU sugar reform, prices have decreased, but have remained well above the new EU internal reference price for white sugar, which is no longer guaranteed (see the above chart). EU sugar consumption has steadily increased to 17.5 million MT in MY 2010/11, despite record high import prices. Because EU industrial sugar users in the food industry secure their sugar from EU sugar processors under long term contracts at the beginning of the marketing year, hence securing adequate sugar volumes and largely escaping the price volatility from the world sugar market, they paid less than the world market price for most of MY 2009/10 and MY 2010/11. There is hence speculation that EU sugar processors will try to negotiate higher prices for the MY2011/12 sugar supply contracts in contrast with price developments on the world market, where sugar prices are expected to decrease again. Because the system of export restitutions was ended in the sugar reform, this could impact the competitiveness of EU sugar containing food exports. EU industrial sugar consumption for non-food purposes has also been steadily increasing, especially with the arrival of bio-ethanol production. However, this increase has stagnated in MY 2010/11 as a result of decreased EU out-of-quota sugar availability and high world market prices. Despite the abolition of the in-quota duty on the EU 400,000 MT sugar import quota for industrial purposes, less than 55,000 MT will be imported in the MY 2010/11 quota year. Fermentation industries, including for bio-ethanol production can switch to other carbon sources than sugar, such as wheat, corn and other starch products, but this has been difficult as prices for these products were also high. During MY 2011/12, it is forecast that large out-of-quota sugar supplies will put downward pressure on EU prices for out-of-quota sugar and therefore provide better sourcing options for the non-food industrial sugar users. However, non-food industrial sugar users can also source inputs from grains, so some trade-off may be seen based on the development of grain prices versus sugar prices during MY 2011/12. EU sugar production quota Out-of-quota sugar in MT white sugar 2008/09 2009/10 2010/11 e 2011/12 f Belgium 676,235 54,897 213,901 76,430 153,200 Czech R. 372,459 50,128 109,615 90,560 127,200 Denmark 372,383 24,713 74,063 86,300 81,000 Germany 2,898,256 818,665 1,425,578 773,600 1,620,000 Greece 158,702 0 13,085 0 0 Spain 498,480 16 108,594 42,460 16,300 France* 3,004,811 1,160,198 1,554,533 1,276,700 1,544,000 French overseas territories 432,220 0 19,291 0 0 Italy 508,379 0 16,359 62,500 0 Lithuania 90,252 55 15,337 10,325 31,800 Hungary 105,420 1,308 2,170 15,080 10,000 Netherlands 804,888 114,351 188,878 88,240 161,000 Austria 351,027 66,370 36,348 93,550 42,100 Poland 1,405,608 20,731 241,408 26,920 237,000 Romania 104,689 6,790 42,524 22,100 27,800 Slovak R. 112,320 819 52,641 17,600 62,000 Finland 80,999 12 7,165 4,825 1,400 Sweden 293,186 42,846 117,561 11,400 97,200 U.K. 1,056,474 135,189 401,783 84,500 304,500 TOTAL 13,336,741 2,497,088 4,640,834 2,783,090 4,516,500 Carry forward to next year quota 413,000 564,400 0 0 Out-of-quota sugar exported 728,000 2,115,000 650,000 2,115,000 Imports of industrial sugar 179,474 7,660 54,226 5,000 Net available out-of-quota 1,535,562 1,969,094 2,187,316 2,406,500 e=estimate; f=forecast *Some sugar beet production under private contracts for bio-ethanol production in France is not included in this table. Trade: Imports EU MY 2010/11 sugar imports, especially from the traditional ACP and EBA [1] exporting countries remained well below quota through the winter, despite an early EC decision for a temporary lifting of the import duty. This occurred as high world demand and high market prices for sugar made the EU less attractive for sugar exporters. In March 2011, the EU began taking additional emergency measures to ease the EU?s low sugar supplies situation, especially in non-sugar producing Member States (MS), and to allow EU specialized sugar refiners to source raw sugar for refining. In April 2011, the EU opened a 300,000 MT additional duty-free import quota, which was highly oversubscribed, yielding an allocation coefficient of only 1.8 percent. On May 26, 2011, the EU Management Committee decided to open an additional duty-free import quota of 200,000 MT, as well as creating the possibility for further sugar imports through five reduced-duty tenders. By mid September, the first four tenders allowed for additional sugar imports of 342,500 MT of raw sugar and 52,900 MT of white sugar at tendered import duties of about half the full duty tariff, or over double the normal in-quota duty of ?98/MT. At a certain point this raised the real cost for sugar imports well above ?800/MT. It is estimated that EU sugar imports will reach 3.8 million MT RSE in MY 2010/11. This level of imports will actually leave the EU sugar market with higher ending stocks than at the end of MY 2009/10. As a result, EU sugar producers are lobbying the EC to halt sugar import tendering since the MY 2011/12 sugar processing campaign started in early September. Given the near record MY 2011/12 EU sugar production, imports in the coming season are forecast to decrease again to more historical levels, especially if world sugar prices remain at high levels. This will further result in a large supply of out-of-quota sugar that must find an outlet on the EU market or for exports. Source: European Commission Source: European Commission as reported by sugar producers and industrial buyers, compared to the world market. Exports EU sugar exports in MY 2010/11 will barely exceed 1 million MT, almost all of it for refined sugar exports to its traditional markets in the Middle East, following the EC decision in the autumn of 2010 to limit the export quota to 650,000 MT of out-of-sugar quota. For MY 2011/12, EU sugar exports are forecast at 2.2 million MT, since the EC opened a 700,000 MT export quota in May 2011 for exports in the first quarter of MY 2011/12 from the 2011 sugar beet harvest. The EC further opened an export quota of 650,000 MT for the new quota year. It is widely expected that the EU will open up a remaining 700,000 MT export quota before the end of the 2011 sugar beet processing campaign in December or early January of 2012. The EU made a similar move for the record 2009 sugar crop [1] ACP: former colonies from Africa and the Caribbean Pacific. EBA: Everything-But-Arms agreement, giving least-developed countries duty free and quota free access to the EU. Stocks: It is forecast that MY 2011/12 EU sugar ending stocks will increase beyond the MY 2010/11 level. This will especially be the case if towards the end of MY 2011/12 processors have been unable to sufficiently market out-of-quota sugar domestically or through exports and must carry over larger amounts of sugar to the MY 2012/12 quota year. In MY 2010/11, EU ending sugar stocks in MY 201/11 increased to more comfortable levels compared to MY 2009/10 as a result of the large duty-free and tendered sugar imports. Policy: EU sugar markets in the CAP post 2013 While the 2007 EU sugar reform was not fully implemented until MY 2009/10, the current EU sugar production quota regime is set to expire at the end of MY 2014/15 as provided in the Single Common Market Organization (CMO) Regulation No 1234/2007. The European Commission is planning to release its proposals for the next Common Agricultural Policy (CAP) post 2013 in October 2011, but early versions of the proposal have been made available to stakeholders. For the sugar CMO, unsurprisingly, the EC is suggesting the end of the sugar production regime with a one-year transition during MY 2015-16. EU sugar beet farmers, through a press release [1] by the European association CIBE, have begun lobbying for the continuation of the quota regime, while the EU sugar processor?s organization CEFS provided their position [2] against ending the quota regime. The EC proposal is in draft form, but it is clear that European sugar users have been unhappy with the EU sugar quota regime, especially since the 2007 sugar reform led to high sugar price volatility and unsecure supplies. The 2007 sugar reform turned the EU from a major net sugar exporter into a large net sugar importer. The main interest of EU sugar users is the secured availability of sugar supplies at reasonable and stable prices. It is probably by these criteria that the EU sugar using sectors will decide whether to support upcoming EC proposals for future EU sugar markets. An upfront impact assessment study by the EC would suggest that EU sugar prices, as a result of the abolition of EU sugar quota, would further decrease 20 percent by 2020 compared to MY 2009/10, while EU sugar production would increase by only 2 percent during this time period. Some EU MS are already arguing that the end to the sugar production quota will lead to the end of sugar production in their MS altogether and that a further geographical concentration of EU sugar production can only lead to more problems than the ones experienced, particularly in the most Eastern- and Southern-most MS, during MY 2009/10 and MY 2010/11. [1] http://www.cibe-europe.eu/Press/179-11%20CIBE%20Press%20Release%207%20September%202011.pdf [2] http://www.cefs.org/ Production, Supply and Demand Data Statistics: EU27 Sugar, Centrifugal (1000 MT) 2009/2010 2010/2011 2011/2012 Market Year begin October 2009 October 2010 October 2011 USDA Official New l Post USDA Officia New SDA Official Post U New Post Beginning Stocks 2,232 2,232 1,447 1,433 1,128 1,814 Beet Sugar Production 16,400 16,400 14,800 14,800 15,000 16,450 Cane Sugar Production 287 287 291 290 300 290 Total Sugar Production 16,687 16,687 15,091 15,090 15,300 16,740 Raw Imports 1,940 1,924 2,200 2,900 3,000 2,500 Refined Imp.(Raw Val) 635 637 900 900 700 650 Total Imports 2,575 2,561 3,100 3,800 3,700 3,150 Total Supply 21,494 21,480 19,638 20,323 20,128 21,704 Raw Exports 7 7 10 9 10 10 Refined Exp.(Raw Val) 2,640 2,640 1,000 1,000 1,000 2,200 Total Exports 2,647 2,647 1,010 1,009 1,010 2,210 Human Dom. Consumption 17,400 17,400 17,500 17,500 17,500 17,600 Other Disappearance 0 0 0 0 0 0 Total Use 17,400 17,400 17,500 17,500 17,500 17,600 Ending Stocks 1,447 1,433 1,128 1,814 1,618 1,894 Total Distribution 21,494 21,480 19,638 20,323 20,128 21,704 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 when world market prices are lower than EU commodity prices. Visit our website: our website http://www.fas.usda.gov/posthome/useu/ provides a broad range of useful information on EU import rules and food laws and allows easy access to USEU reports, trade information and other practical information. E-mail: AgUSEUBrussels@fas.usda.gov Related reports from FAS EU NL1013 EU-27 Annual Biofuels Report 06/24/2011 E60033 Poland proposes increase to EU sugar production quota 05/18/2011 E60026 Industrial uses of sugar from sugar beet increasing in the EU 04/27/2011 E60021 Sugar, Centrifugal 04/08/2011 These reports can be accessed through the FAS website at http://gain.fas.usda.gov/Pages/Default.aspx
Posted: 13 November 2011

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