EU sugar policy, CAP reform, African sugar outlook.

1. 1
EU Sugar Reform and Outlook
3rd Africa Sugar Conference
Nairobi, 15th April 2013

2. 2
Latest Update on EU Commission Sugar
Reform and Outlook after 2015
• EU Sugar Market Overview
– Some statistics
• Supply and demand statistics
• Imports from third countries
• The commercial landscape
• EU sugar prices
• EU Commission CAP Reform Process
• Post 2015 market outlook
• Some tentative conclusions for African sugar
stakeholders

3. 3
Sugar beet areas in the EU-27

4. 4
EU sugar beet yields

5. 5
Total EU sugar production

6. 6
The EU sugar quota system
EU sugar
production and
preferential
imports
Quota Food Use
Out-Of-
Quota
(“OOQ”)
Chemical
Ethanol
Carry-
Forward
Exports

7. 7
Production and preferential imports within the
quota (thousands of tonnes; 2012/13)

8. 8
Disposal of in-quota sugar in 2012/13 (kt)

9. 9
Production of out-of-quota (OOQ) sugar

10. 10
Disposal of OOQ sugar in 2012/13

11. 11
EU sugar producers and refiners

12. 12
EU sugar producers and refiners
0
1,000
2,000
3,000
4,000
5,000
6,000
Ktw.s.e.
Sugar quota 2011/12 OOQ production 2011/12 Refining 2011/12

13. 13
A growing surplus of sugar in the EU

14. 14
3rd Africa Sugar Conference
EU surplus / deficit areas 2011/12 by 0.25º square

15. 15
EU domestic white sugar prices

16. 16
Traders (members of ASSUC)

17. 17
Export destinations for EU sugar

18. 18
Import origins

19. 19
Origins of imports into the EU

20. 20
African sugar exports to the EU

21. 21
African quality exports to the EU

22. 22
EU markets for African EPA-EBA sugar

23. 23
Commission proposals
12th October 2011
• The European Commission proposes for sugar as from
1st October 2015:
– New Common Organization of the Markets (COM) regulation.
– EU production quotas abolished.
– EU sugar reference prices remain unchanged.
– Minimum beet price abolished.
– Direct payments to sugar farmers continues (€1.5bn/annum).
– Raw sugar supply needs for refiners abolished.
– Compulsory withdrawal abolished.
– Private storage mechanism maintained.
• Also:
– MFN import tariffs – no proposal.
– FTA negotiations – will (presumably) continue.

24. 24
CIBE Beet growers.
CEFS Beet processors.
AAF Isoglucose producers (starch
industry).
EFFAT Trades unions.
ASSUC Sugar traders.
ESRA Sugar refiners.
CIUS Industrial sugar users.
ACP African, Caribbean and Pacific
Group.
EU sugar associations

25. 25
European Parliament mandate
13th March 2013
• Amendments to proposed new COM regulation:
– Cut and paste old COM sugar legislation into new regulation.
– Maintain quotas until 1st October 2020.
– New (“Dantin”) mechanism for exceptional imports and
exceptional release of OOQ sugar.
– Reinstatement of renounced quotas (to Ireland, Portugal).
– Maintenance of existing rules for Full-Time Refiners.
– Maintenance of existing direct payments to farmers including
€1.5bn per annum (hypothecated) for beet farmers.

26. 26
Council mandate
19th March 2013
• Irish Presidency compromise and mandate:
• Commission proposal for new COM regulation largely
accepted:
– I.e. No legislation on sugar quotas, refining needs, etc.
– No reinstatement of renounced quotas.
– Council to decide reference prices “when necessary”.
• However, old COM regulation to be extended for sugar
until 30th September 2017.
– I.e. Sugar quotas, refining needs and all associated
paraphernalia extended until 30th September 2017.

27. 27
“Co-decision” or “Trilogue” (Ordinary
Legislative Procedure)

28. 28
EU free trade agreements
Where are we? (25th March 2013)
• Forthcoming negotiations
– Japan
– United States of America
– ASEAN
– Southern Mediterranean
• On-going negotiations
– Canada
– India
– Malaysia and Vietnam (ASEAN)
– Mercosur
– Eastern neighbourhood
– Gulf Cooperation Council
– African, Caribbean and Pacific
countries
• Completed negotiations, yet to
enter force
– Singapore
– Colombia
– Central America
– Ukraine
– African, Caribbean and Pacific
countries
• FTAs already in force
– Peru (1st March 2013)
– South Korea (1st July 2011)
– Mexico (October 2000)
– South Africa (2000)
– Chile (November 2002)
– ACP – Cariforum, ESA and
Southern Africa
Source: http://europa.eu/rapid/press-release_MEMO-13-282_en.htm

29. 29
EU free trade agreements and WTO
Sugar quotas already agreed
Other sugar quotas 2013/14 Quantity (kt) Notes
CXL Australia 9.9 Raws only; licences allocated by "tender".
CXL Brazil 334.1 Raws only; licences allocated by "tender".
CXL Cuba 69.0 Raws only; licences allocated by "tender".
CXL "Erga Omnes" 254.0 Raws only; licences allocated by "tender".
CXL India 10.0 Whites or raws; licences allocated by "tender".
Central America 150.0 Increases by 3% per annum. Whites or raws. Imports likely to be "boat race".
Colombia 62.0 Increases by 3% per annum. Whites or raws. Imports likely to be "boat race".
Peru 22.0 Increases by 3% per annum. Whites or raws. Imports likely to be "boat race".
Total (so far) 910.9

30. 30
Other issues
• Rules of origin
– Direct transport rule (e.g. co-mingling of different ACP origins of
bulk raw sugar at loading or on board a vessel)
– Cumulation of origin (e.g. adding value to ACP sugar exports)
• Licence regulations
– Polarization cut-off at 99.5 ºZ
– Electronic documents
– Tolerances on import licences
– Documentary requirements (e.g. export licences)
– Uniform customs treatment

31. 31
Possible outcomes?
• The big issue for sugar – the only issue – is the end date for
EU sugar quotas.
• No harm in continuing to lobby until the last moment.
• Sugar may be left until the end of the CAP reform triologue
negotiations (20th June 2013).
• Simple average of 1st Oct 2015, 1st Oct 2017 and 1st Oct 2020
is 30th January 2018. Hence a compromise end date for
quotas could be 1st October 2018 ???
• If no decision under the Irish presidency, the negotiations will
likely continue after the summer under Lithuanian presidency.
• Declarations may be annexed to any decision, e.g. instructing
the Commission to make certain proposals should the EU
sugar market collapse after quotas abolished.

32. 32
Commercial developments in the EU
Investment in supply chains /
logistics, intermodal freight, etc.
Investment in factory
efficiency, e.g. beet juice, longer
campaigns, etc.
Investment in standalone and
off-crop cane refining capacity.
Transferable production quotas
(“travail à façon”).
Investment in farm
efficiency, e.g. winter
beet, GMO, etc.
Procurement of sugar from a
diversity of suppliers:
beet, cane, processors, refiners,
traders, etc.
High beet
prices; Low
cereals prices;
Low EU-#11
gap.
High beet
prices; Low
cereals prices;
High EU-#11
gap.
Low beet
prices; Low
cereals prices;
Low EU-#11
gap.
Low beet
prices; Low
cereals prices;
High EU-#11
gap.
High beet
prices; High
cereals prices;
Low EU-#11
gap.
High beet
prices; High
cereals prices;
High EU-#11
gap.
Low beet
prices; High
cereals prices;
Low EU-#11
gap.
Low beet
prices; High
cereals prices;
High EU-#11
gap.

33. 33
United States vs. European markets

34. 34
Implications for African sugar
• Volatility
• Arbitrage opportunities
• Competitivity
• Flexibility
• Diversification
• Routes to market
• Imports into southern Europe
(exports from the North)
• Quality and food safety
considerations
• Financial risk management

35. 35
Disclaimer
• The opinions, views and forecasts expressed herein reflect the personal
views of the author and do not necessarily reflect the views of ED&F
Man nor ASSUC nor the member companies of ASSUC (“we”, “our”).
• Any comments or opinions in this report are not intended to be an offer
to buy or sell commodities or futures and options thereon as they
merely state our views and carry no guarantee as to their accuracy.
• We make no representation or warranty that the information contained
herein is accurate, complete, fair or correct.
• All information, prices or projections are subject to change without
notice.
• This information is not intended to be construed as investment advice.
• We do not accept any liability or loss or damage arising from any
inaccuracy or omission in or the use of or reliance on the information in
this document.

36. 36
Thank you!
Julian Price
E. D. & F. Man Sugar Ltd.,
Cotton’s Centre, Hay’s Lane,
London.
SE1 2QE
Email: julian.price@edfman.com
Landline: +44 (0) 20 7089 8424
Mobile: +44 (0) 7768 908347
ASSUC aisbl
European Association of Sugar Traders
Rue de Trêves 49-51, Box 14
B - 1040 Brussels
Tel +32(0) 27 366 873
http://www.assuc.eu/
@sugartraders