Udvalget for Fødevarer, Landbrug og Fiskeri 2004-05 (2. samling)
KOM (2005) 0263
Offentligt
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COMMISSION OF THE EUROPEAN COMMUNITIES
Brussels, 22.6.2005
SEC(2005) 808
COMMISSION STAFF WORKING DOCUMENT
Reforming the European Union’s sugar policy
Update of impact assessment [SEC(2003) 1022]
{COM(2005)263 final
}
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TABLE OF CONTENTS
1.
2.
2.1.
2.2.
3.
3.1.
3.2.
4.
4.1.
4.1.1.
4.1.2.
4.1.3.
4.2.
4.2.1.
4.2.2.
5.
5.1.
5.1.1.
5.1.2.
5.1.3.
5.1.4.
5.2.
6.
6.1.
6.2.
Procedural issues and Consultation of Interested Parties............................................. 3
Problem Definition....................................................................................................... 3
Drivers of Change ........................................................................................................ 3
Methodological aspects................................................................................................ 5
Objectives..................................................................................................................... 5
General policy objectives............................................................................................. 5
Contribution to the Lisbon and Sustainable Development Strategies.......................... 6
Policy options............................................................................................................... 7
Possible options............................................................................................................ 7
“No reform” ................................................................................................................. 7
“Price cut” .................................................................................................................... 7
“Full Liberalisation – removal of price support and quota regime” ............................ 7
Option Retained ........................................................................................................... 7
July 2004 Communication ........................................................................................... 7
Legislative Proposal ..................................................................................................... 8
Analysis of impact........................................................................................................ 8
Assessment of the economic impact .......................................................................... 10
Farm Profitability ....................................................................................................... 10
Combined profitability of farmers and processors..................................................... 11
Profitability of the sugar industry as a whole............................................................. 12
Overall economic impact ........................................................................................... 15
Social impact.............................................................................................................. 17
Monitoring and evaluation ......................................................................................... 17
Monitoring.................................................................................................................. 17
Evaluation .................................................................................................................. 18
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1.
P
ROCEDURAL ISSUES AND
C
ONSULTATION OF
I
NTERESTED
P
ARTIES
In September 2003 the Commission published a Communication
1
on the options for
reform of the EU sugar regime, with an accompanying Extended Impact Assessment
on the Sugar Sector
2
, followed in July 2004 by a Communication outlining the
Commission’s proposal for the future of the EU sugar regime
3
.
From the resulting debate, the Commission has taken into account the views
expressed by the Council, the European Parliament
4
, the European Economic and
Social Committee
5
and other Consultative Committees
6
, and has incorporated new
elements into the accompanying legislative proposal. As a follow-up to those
consultations made in the initial impact assessment work in 2003 and 2004, further
contributions from stakeholders were also received.
A dialogue is currently taking place with third countries regarding the Commission’s
Working Paper
7
for an “Action Plan on accompanying measures for Sugar Protocol
countries affected by the reform of the EU sugar regime.” Various meetings have also
been held on the action plan and on the sugar reform on 13 September
8
and
13 October 2004
9
, 24 January
10
, 7 March
11
and 26 April 2005
12
.
Consequently, the present impact assessment incorporates new information gathered
since the publication of the initial impact assessment SEC(2003) 1022. The relevant
documentation can be found on the DG Agriculture website
13
. It therefore represents
an update addressing specific elements corresponding to the impact of the definitive
legal proposal.
2.
2.1.
P
ROBLEM
D
EFINITION
Drivers of Change
Under the current regime the EU sugar sector is unsustainable
The findings of the Commission’s first Extended Impact Assessment pointed to an
unsustainable future for the EU sugar sector under the current regime because:
•
the maintenance of current high EU prices would dramatically increase sugar
imports at the expense of domestic EU production;
1
2
3
4
5
6
7
8
9
10
11
12
13
COM(2003) 554 final.
SEC(2003) 1022.
COM(2004) 499 final.
Final Resolution P6 - TA(2005)0079 adopted at the plenary session of 10 March 2005.
Opinion 1646/2004 - NAT 258, adopted on 15 December 2004.
The Standing Group “Sugar” of the Advisory Committee “Arable Crops” has discussed the sugar reform
on three occasions since September 2003, namely 15 March, 20 September and 6 December 2004.
SEC(2005) 61 of 17 January 2005.
Meeting with Least Developed Countries, Brussels.
Meeting with ACP ministers in Copenhagen.
Informal Meeting with Ministers of the sugar-producing ACP countries and LDC, Brussels.
EC-Caribbean Technical Workshop on adaptation following EU Sugar Reform, Port of Spain (Trinidad).
ACP Consultative Group on Sugar on accompanying measures for Sugar Protocol countries, Brussels.
Documents available include “A Description of the EU Sugar Common Market Organisation
(AGRI/63362/2004, September 2004), “Sugar - International Analysis and Production Structures within
the EU” and “Statistical information on the Sugar Sector”.
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•
the current quota mechanism would lead to a mechanical reduction in EU
production. Sugar production under quota in the EU’s most competitive sugar
producing regions, with relatively higher levels of B sugar, would be cut relatively
more than in less competitive regions, with smaller B quotas;
•
such a situation would lead to a gradual erosion of the EU sugar sector and bring it
into even greater contradiction with the prevailing direction of CAP Reform, just
when reformed sectors would be improving their competitiveness and market
orientation.
The EU sugar sector needs to be competitive and to join in the CAP reform process
If unchanged, the EU sugar policy will become an anomaly deviating from the
fundamental principles of the new Common Agricultural Policy (CAP) – market
orientation, decoupled farm income support, and a better balance between the two
pillars of the CAP via the strengthening of rural development. The necessary steps to
incorporate the EU sugar common market organisation (CMO) into the CAP reform
process would include:
•
integrating the EU sugar sector into the sustainable, long-term policy perspective
established for agriculture, in line with its present budgetary envelope and the
framework for agricultural expenditure, and the modulation and financial
discipline mechanisms;
•
improving the competitiveness of the EU sugar sector by significantly reducing
institutional support prices and simplifying the current quota arrangements,
thereby making way for an economically sustainable EU sugar production base;
•
giving priority to producer income support by transferring part of the current
support for the EU sugar sector to the single payment scheme;
•
making these payments subject, as is the case with all CAP direct payments, to the
respect of statutory EU environmental and food safety standards, through cross-
compliance, and rules of good agricultural and environmental condition, as well as
to the modulation mechanism.
The EU sugar sector must continue to meet its international commitments
The EU sugar sector faces a number of challenges related to the EU’s international
commitments on sugar, which include:
•
the implementation of the EBA initiative and its expected impact, in terms of
increased sugar imports into the EU;
•
the provisions of the current ACP sugar protocol and India agreement, which
commit the EU to buy annually at a guaranteed price an agreed quantity of
1.3 million t of white sugar equivalent;
•
the findings of the World Trade Organisation (WTO) panel challenging the EU
sugar export regime, as upheld by the Appellate Body
14
, which have clarified the
conditions under which the EU may conform to the export subsidy quantity
commitment of 1 273 million tonnes, as specified in the EU schedule;
•
the need to uphold the benefits to the Western Balkans of the EU sugar import
regime, while at the same time providing a sustainable framework for the sugar
14
Appellate Body Report AB-2005-2, EC-Export Subsidies on Sugar, of 28 April 2005.
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sector of these countries that is consistent with their long-term orientation towards
the EU. In this context, the Commission proposed the introduction of a tariff rate
quota (TRQ) at levels that preserve the present export levels to the EU from
Western Balkans countries and the prospects of an economically sustainable
balance between their production and consumption. In addition to the ongoing
dialogue with Croatia and the Former Yugoslav Republic of Macedonia, a TRQ
was introduced for Albania, Bosnia-Herzegovina and Serbia-Montenegro
15
, as
from 1 July 2005.
2.2.
Methodological aspects
The broad environmental and social impact of the policy reform options considered
by the Commission in September 2003 has already been described in the initial
impact assessment. Owing to the limited additional information available to the
Commission services since the publication of that initial assessment, greater emphasis
has been given here to an assessment of the economic impact.
Thus, the economic impact of the proposed EU sugar regime reform has been
analysed, firstly taking into account the views of the following economic actors:
•
Consumers
•
Agri-food industries
•
Starch (isoglucose) industry and inulin syrup producers
•
Sugar refineries
•
African, Caribbean and Pacific countries (ACP)
•
Least Developed Countries (LDC)
•
EU sugar factories
•
EU sugar beet growers
At a second stage, the impact on production at regional and Member State level was
assessed. The impact assessment closes with an assessment of the overall economic
impact of the proposed reform.
3.
3.1.
O
BJECTIVES
General policy objectives
The objectives of the sugar sector reform should be coherent with those of the recent
overall approach to CAP reform, namely, to seek:
•
a sustainable long-term policy perspective for the sector;
•
a future for the sector based upon improved competitiveness, greater market
orientation and a sustainable market balance consistent with the EU’s
commitments with respect to third countries and international trade rules.
15
Council Regulation (EC) No 374/2005 (OJ L 9, 5.3.2005, p. 1).
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These objectives should also be achieved whilst ensuring that account is properly
taken of producer incomes, consumers’ interests and the situation of the processing
industry, in particular the need for a period of transition to permit the necessary
adjustments.
3.2.
Contribution to the Lisbon and Sustainable Development Strategies
The 2003 CAP reform represents a key step towards a more forward-looking,
business-oriented and sustainable EU agriculture sector. If unchanged, the EU sugar
policy will become an anomaly deviating from the fundamental principles of this new
direction to the CAP.
The overarching objective of the EU sugar sector reform should therefore be to align
itself with the fundamental principles of that new CAP, thereby contributing to the
goals of the Lisbon strategy by:
•
promoting a more open and competitive EU sugar market;
•
increasing market orientation;
•
fostering more dynamic entrepreneurship amongst farmers and producers;
•
maintaining a level of economic activity and employment in the most competitive
sugar producing Member States, which would be severely threatened under the
“No reform” option;
•
offering more favourable conditions for the restructuring of the sugar industry in
the least competitive sugar producing Member States, which will move out of
production.
In relation to the Sustainable Development Strategy, in line with the Presidency
Conclusions of the European Council in Göteborg 2001, the objectives of the 2003
CAP reform are clearly to contribute “to sustainable development by increasing its
emphasis on encouraging healthy, high quality products, environmentally sustainable
production methods, including organic production, renewable raw materials and the
protection of biodiversity.” Aligning the EU sugar sector with the 2003 reform
approach will bring:
•
economic sustainability by moving away from the principle of the apportionment
of the production capacity, currently built into the sugar quota regime, towards a
more competitive, more market-oriented sector;
•
social sustainability by achieving the necessary economic restructuring of the
sector with the aid of instruments offering better conditions for those parts of the
EU sugar industry that will move out of production, and fulfilling the EU’s
international commitments;
•
environmental sustainability by connecting the sugar CMO, as part of the CAP,
with the application of EU environmental legislation through the cross-compliance
principle.
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4.
4.1.
P
OLICY OPTIONS
Possible options
The Commission initially considered three possible policy orientations for the EU
sugar regime, which were analysed in the September 2003 Extended Impact
Assessment, taking into account the effects of the internal and external constraints
placed on the sector and the ongoing dispute currently before the WTO.
4.1.1.
“No reform”
As a reference for the alternative scenarios, the consequences of an extension of the
present regime beyond 2006 were assessed. This consisted of keeping intact the
current common market organisation, based on flexible quotas, which maintain
market balance through the quota adjustment mechanism and price intervention. The
EU market would be open to import quantities according to the various international
commitments already agreed or agreed in the future.
4.1.2.
“Price cut”
The second scenario evaluated was a reduction in the EU internal price. Once imports
and production levels stabilised, production quotas would be phased out and the
internal market price would be allowed to adjust itself to the price of those imports.
To smooth the effects of the reduction in the EU sugar price, this scenario also looked
at the possibility of introducing the single payment scheme into the sugar sector, in
line with the June 2003 CAP reform.
4.1.3.
“Full Liberalisation – removal of price support and quota regime”
The third option for reform represented a complete liberalisation from the current
regime. This meant that the domestic EU price support system would be abolished
and production quotas would be abandoned.
4.2.
4.2.1.
Option Retained
July 2004 Communication
In its July 2004 Communication, the Commission discarded two of the three options.
The “No reform” option was deemed unsustainable in the medium term while the
“full liberalisation” option was considered unbalanced, in terms of its impact on EU
producers and trade partners, such that it did not offer realistic prospects for their
long-term future.
The option retained by the Commission was based on the “Price cut” scenario, with
quota adjustments, and broadly consisted of the following:
•
a significant reduction (33%) in two steps of the institutional support price for EU
sugar, with the abolition of intervention and the introduction of a reference price;
•
the introduction of direct decoupled payments, within CAP budget limits, with the
same historical reference period as used in the 2003 CAP reform (2000–2002).
This payment was to be integrated into the single payment scheme;
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•
simplification of the present quota system by merging the “A” and “B” quotas into
one quota and the reduction of the resulting total quota level, in order to reach a
sustainable balance on the EU sugar market. The “C” sugar provisions were to
remain as at present.
In addition, the proposal was to provide the basis for initiating a structured dialogue
on the sugar sector with EU partners in the developing world, in order to consider
how the EU can best contribute to the necessary and inevitable adjustments to sugar
production in African, Caribbean and Pacific (ACP) countries and India.
4.2.2.
Legislative Proposal
The current proposal remains based on the “Price cut” option with quota adjustment
and consists of the following:
•
the EU sugar regime will be prolonged until the end of the 2014/15 marketing year
and there will be no review of price and quota levels in 2008;
•
a significant reduction (39%) of the institutional support price net of restructuring
amount for EU sugar, in two steps, with the abolition of intervention and the
introduction of a reference price;
•
the introduction of direct decoupled payments within CAP budget limits, with the
same historical reference period as used in the 2003 CAP reform (2000–2002).
This payment will be integrated into the single payment scheme;
•
simplification of the present quota system by merging the “A” and “B” quotas into
one quota. In order to uphold a certain production level in current “C” sugar
producing Member States, an additional quota of 1 million tonnes, subject to a
one-off charge, shall be made available;
•
there will, in principle, be no compulsory quota cuts. Market balance will be
ensured by the market balance tools proposed (i.e. carry forward, withdrawal and
private storage measures) and the amounts of sugar quota entering a voluntary
restructuring scheme;
•
the restructuring scheme will provide a high, degressive per-tonne restructuring aid
for factory closures and quota renunciation, plus a top-up payment to ensure sugar
beet growers the possibility of receiving the full, final direct payment, in the event
that they abandon production when the factory with which they have sugar beet
delivery rights closes under the restructuring scheme.
5.
A
NALYSIS OF IMPACT
The broad environmental and social impact of the policy reform options considered
by the Commission in September 2003 has already been described in the initial
impact assessment. The following paragraphs, therefore, will concentrate on the
economic and social impact of the updated options contained in the new legal
proposal, i.e. a price decrease of 39% in two years, the introduction of a restructuring
scheme.
The potential environmental impact of the proposed sugar reform does not differ to
any significant degree from that described in the September 2003 impact assessment.
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Starting with actors at the end of the food chain, it is expected that some internal price
reductions should benefit consumers but, due to the rigid price elasticity of sugar, the
impact on sugar consumption is expected to be low.
In this context, the most important health impact would not be on the overall
consumption level but rather the composition of the intake of sweeteners. While it is
considered that a lower sugar price could be detrimental to synthetic sweetener
consumption, an increased supply of isoglucose could substitute for sugar in certain
food products, such as soft drinks. From a health perspective, the effect of such
changes in consumption patterns is currently under debate in the medical community.
There is, however, no clear agreement as to whether the problem lies with the
composition of isoglucose, or with the significant increase in its consumption, in soft
drinks and processed foods.
Since sugar is an important input for the agri-food industry, lower sugar prices would
mean they would benefit from a decrease in their variable costs.
Within the starch industry, isoglucose production should remain competitive at the
price level envisaged by the current legal proposal. Therefore, for the industry it
would be a matter of arbitration among sweeteners, given the strong interdependences
among their prices and with respect to the sugar price. This could have an impact on
the overall consumption of sweeteners under quota (raw sugar cane, beet sugar,
isoglucose, and inulin syrup). Finally, as the isoglucose market will enlarge following
the increase in the isoglucose quota by 300 000 tonnes; it is less probable that
isoglucose factories would resort to the restructuring scheme.
Regarding inulin syrup producers, the less competitive ones would probably find it
attractive to take advantage of the restructuring scheme.
Sugar refineries will in time have access to a larger supply at lower prices, while
during the transition period their supply needs will be ensured through privileged
access to Traditional Supply Needs.
As concerns the ACP countries, any option involving a price reduction will affect the
countries benefiting from the Sugar Protocol by reducing the income accruing from
exports to the Community. Recognising the need for adjustment due to the reform,
the Commission has initiated a dialogue with ACP countries on the basis of an Action
Plan
16
in order to define appropriate accompanying measures covering both
development and trade. The Action Plan outlines possible development areas
according to country-specific needs, such as sustainable improvement of the
competitiveness of the sugar sector where economically viable, promotion of
diversification and mitigating social consequences where improvements in the sugar
sector are not viable.
The Least Developed Countries (LDC) benefit from the EBA initiative, which
abolishes quotas and duties for all products except arms exported to the EU, with a
transition period
17
for sugar, to be fully implemented from 2009/10 onwards. Most
16
17
Commission staff working paper “Action Plan on accompanying measures for Sugar Protocol countries
affected by the reform of the sugar regime”.
A reduction of import duties on sugar by 20% on 1 July 2006, by 50% on 1 July 2007 and by 80% on
1 July 2008 until their entire elimination on 1 July 2009.
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LDC are also ACP countries (40 out of 49). There are five ACP sugar protocol
members (Zambia, Madagascar, Mozambique
18
, Malawi and Tanzania) exporting
under EBA and four ACP non-protocol members (Ethiopia, Burundi, Burkina Faso
and Sudan). The only non-ACP LDC exporting sugar at present is Nepal, but there
are other potential exporters that could increase their exports through import-export
swaps and regional cumulation. The EBA initiative does not provide any price
guarantee for sugar imported from LDC countries. But sugar imported from the EBA
countries will continue to benefit from the higher EU domestic price. This price is
equivalent to € 303/t for raw sugar from 2008/09 onwards.
From the point of view of EU sugar beet processors, in the light of a reduction in
sugar prices, the future profitability of sugar beet processing will depend on whether
processors can keep their margins positive by reducing processing costs per tonne or
reducing raw material costs. If processing becomes unprofitable, processors will stop
their activity. Since sugar beet is a bulky raw material, with high transport costs,
closure of a sugar beet factory may lead to abrupt production abandonment in a
certain region, at farm level.
From the point of view of EU sugar beet growers, in the light of reducing sugar
prices, the future maximisation of profit will depend on whether farmers can reduce
their sugar beet growing costs per tonne or switch from sugar beet to alternative crop
production, should the margin per hectare of sugar beet fall below that for the
alternative crops.
The combined profitability of sugar beet growers and processors is important because
they depend strongly on each other, such that in a given region:
•
if the sugar price falls below the combined costs per tonne of growing and
processing sugar beet, the industry will have no alternative but to stop all activity;
•
if the sugar price remains above the combined costs per tonne of growing and
processing sugar beet, economic activity will continue but the investment strategy,
particularly of the processing sector, will be adapted to take into account expected
market developments.
5.1.
5.1.1.
Assessment of the economic impact
Farm Profitability
A simulation of the effect on farm incomes of the legal proposal for reforming the
sugar sector was carried out on the basis of EU FADN data (2000–2001). Note that
calculations were performed under the hypothesis that following CAP reform full
decoupling is applied in all Member States.
The analysis led to the estimated average break-even prices shown below, at which
level sugar beet becomes less profitable than competing crops (wheat, barley, maize,
durum, and sunflower). This is the price level at which, on average, the farmer
decides to switch from sugar beet to other crops.
18
Mozambique signed the sugar Protocol in 2005.
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The estimates for break-even prices were then compared with the minimum price
proposed for sugar beet under full implementation of the reform: € 25/t. At farm level,
three groups of Member States can be distinguished, as shown in Table 1.
Table 1
Breakdown of MS according to the estimated average break-even price
for sugar beet at farm level
Not clear cut
Member States
Break even
price €/t
Much more than 25€/t
Member States
Break even
price €/t
Close to 25€/t
Member States
Break even
price €/t
Finland
Greece
Italy
Spain
44
34
42
36
UK
Austria*
Sweden
40
40
34
B-NL
Denmark
France
Germany
30
25
26
30
* Austria's position will depend on the competing crop chosen for the analysis.
1.
MS where the break-even price is much higher than € 25/t: Finland, Greece,
Italy and Spain.
For Finland, the main factor is rather the low level of sugar beet yields. The
coupled supplement that can be granted for drying cereals and oilseeds also
raises the break-even price for sugar beet.
For Greece, Spain and to some extent Italy, the profit margin obtained from the
relatively more attractive competing crop (maize) is the main factor explaining
the high break-even price for sugar beet. Within MS there might be significant
differences at regional level, depending on the competing crop.
2.
In three MS the decision to move out of sugar will depend on other factors.
In the UK the future of sugar beet growing will depend on the capacity for gains
in production efficiency by improving yields and reducing costs.
In Sweden, it will depend on the decision concerning the drying aid for cereals.
In Austria, this result is much more related to statistical issues, i.e. data
sampling, so should be viewed with caution.
3.
MS where the break-even price is close to or below € 25/t: Denmark, France,
Germany and Belgium-Netherlands
19
.
These countries are characterised by high yields (especially FR) and an efficient
use of inputs (in particular BE-NL).
5.1.2.
Combined profitability of farmers and processors
Ultimately it is the projected combined profitability for growers and processors that
will determine the impact of the reform. An indication of the combined profitability
may be derived by comparing average sugar processing costs and field production
19
Belgium and the Netherlands have been considered together in order to obtain a larger sample of
specialised farms.
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costs in the different Member States with the EU-15 averages. This comparison is
shown in figure 1.
•
There are countries like France where both the processing industry and the farm
sector are more competitive than the EU average.
•
There are countries like Belgium where farmers are quite competitive but the
industry presents moderately higher costs than the EU average.
•
There are countries like Sweden and Finland where the processing industry is
sufficiently efficient, but the farm sector is less competitive than the EU average.
•
There are countries like Greece where both the farm sector and the processing
industry are less efficient than the EU average.
Staying in the market is determined by the capacity either of the farm sector or the
processing industry or both to adjust to price cuts.
Figure 1 Relative Position of Member State Sugar Beet Farmers and Factories according to Costs
150
Difference between average cost of sugar processing
and EU average ($/t)
"Competitive" farmers
"High cost" factories
IT
100
"High cost" farmers
"High cost" factories
EL
50
IRL
P
B
-150
-100
-50
ES
NL
DK
0
0
EU
50
100
FIN
150
200
DE
A
-50
F
SW
"Competitive" farmers
"Competitive"
factories
-100
UK
"High cost" farmers
"Competitive" factories
-150
Difference between average cost of field production and EU average ($/t)
5.1.3.
Profitability of the sugar industry as a whole
5.1.3.1. Impact of the proposed price cuts at regional level
Based on available average data for the regions and EU-15 Member States, a
simplified representation is given of the possible response that could be expected in
terms of the abandonment of sugar production in regions and Member States. This is
based on the declining profitability of the sugar sector in the region concerned due to
falling sugar prices.
Results have to be taken as likely outcomes and thus interpreted cautiously. In fact,
they depend strongly on the data and the method used. Other in-house analysis shows
broadly similar results, but the picture might differ greatly for some regions that are
quite sensitive to the working hypothesis. This is, for example, the case for Spain.
Moreover, these results should not be understood as forecasting the disappearance of
sugar production in the regions nor in the Member States concerned.
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According to the available data and the method employed it is likely that within
EU-15 Member States:
•
as the sugar price falls below € 550/t, sugar beet production would probably be
threatened first in southern and northern Italy;
•
a price below € 500/t would make sugar production less profitable in Ireland,
Portugal, central Italy, Greece and parts of southern Spain, therefore in these
regions production is likely to decline;
•
should prices fall further (i.e. below € 400/t) sugar beet production in northern
Spain and Denmark could become less profitable. Production would be likely to
decrease too in other regions, like parts of the Netherlands, southern Spain and
some regions of Germany.
Table 2
Sugar Break-even Price and Production under Quota (‘000
tonnes)
in EU Regions and Member States
Cumulated
Production under production under
Sugar production
quota (average
quota
(average 2000-01)
1999/00 - 2000/01) (average 1999/00 -
2000/01)
205,7
205,7
205,7
1.234,7
1.092,8
1.298,5
266,2
198,0
1.496,5
59,4
66,5
1.563,0
277,9
246,0
1.809,0
414,9
350,4
2.159,4
468,5
272,0
2.431,4
172,2
145,0
2.576,4
686,9
580,1
3.156,5
519,5
416,5
3.573,0
1.014,0
856,0
4.429,0
74,6
63,0
4.492,0
1.144,9
432,6
420,9
970,5
1.061,1
1.413,6
941,3
1.632,1
476,9
511,6
983,8
666,3
333,7
1.012,8
930,0
384,0
366,0
788,4
862,0
1.132,5
812,5
1.240,3
362,4
391,4
799,2
506,4
253,6
769,6
5.422,0
5.806,0
6.172,0
6.960,4
7.822,4
8.954,9
9.767,4
11.007,6
11.370,0
11.761,4
12.560,6
13.066,9
13.320,5
14.090,2
Euros per tonne
Regions
above 550
between 500 and 550
Southern Italy
Northern Italy
Ireland
Portugal
Central Italy
between 450 and 550
Southern Spain (irrigated)
Greece
Finland
Northern Spain
between 400 and 450
Denmark
Netherlands
Spain South (dry)
Niedersachsen, Bremen, Hamburg,
Schleswig-Holstein
Austria
between 350 and 400 Sweden
Eastern Germany
Nordrhein Westfallen, Hessen,
Rheinland Pfalz
UK
Belgium
Picardie
Ile de France
France: other regions (Centre,
Bourgogne, Est, Centre Est)
between 300 and 350 Bayern, Baden-Wuttenberg, Saarland
France_ Nord
Normandie
Champagne-Ardennes
5.1.3.2. Summary of impact of the proposed price cuts at Member State level (EU-25)
Assessing the specific impact of the proposed price cut, based on estimates of the
combined profitability of the industry (growers + manufacturers) the EU-25 sugar-
producing Member States fall into three groups, depending on their level of costs
compared with the new sugar price (€ 386/t):
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•
MS where sugar production is likely to be drastically reduced or even phased out:
Greece, Ireland, Italy, Portugal;
•
MS in the border zone: Czech Republic, Spain, Denmark, Latvia, Lithuania,,
Hungary, Slovakia, Slovenia and Finland. In these MS, production is likely to be
maintained but at a significantly lower level;
•
MS where the decrease in sugar production will be limited. It is even likely that
overall production would not decrease in some MS: Austria, Belgium, France,
Germany, the Netherlands, Poland, Sweden and the UK.
Table 3 indicates recent production figures for these Member States, broken down
according to the above groups. Figures refer to production under quota for the
marketing year 2003/04.
It is important to note that current production is lower than the quota. Some Member
States or regions have not fulfilled their quotas for several years.
Table 3
Breakdown of Member States according to combined profitability
The reduction in sugar production is likely to be….
Drastic (1)
Significant (2)
Limited (3)
Member States
Current
Production*
1000 t
Member States
Current
Production*
1000 t
Member States
Current
Production*
1000 t
Greece
Ireland
Italy
Portugal
Sub total
% of current prod (*)
Production EU 15
Quota EU 10
Total EU-25
311 Czeck Republic
197
Denmark
954
Finland
70
Hungary
Spain
Other new MS:
Latvia, Lithuania,
Slovakia, Slovenia
1.532
9%
455
413
145
402
991
430
Austria
Belgium
France
Germany
Netherlands
Poland
Sweden
UK
2.836
17%
13.454
2.958
16.412
382
808
3.497
3.341
851
1.672
365
1.129
12.044
73%
* A+B Production 2003/04 for EU-15 MS, quota for new MS
If Member States in group (1) fully abandoned production, this would represent a 9%
drop compared with EU-25 quota sugar production in 2003/04. However, it is not
excluded that some factories would remain in business.
Within the “borderline” group (2) some factories will close down, while others will
stay in business and try to increase their production. In fact, some Member States
could have been classified under group (3). For instance Denmark could have been
considered alongside Sweden, as there are economic links between factories in these
Member States. Factory ownership and the related restructuring and implementation
policy have also influenced the classification of Finland.
Member States in group (3) will on the one hand undergo a limited reduction in
production under quota but, on the other, will narrow down their C sugar production
20
20
Studies suggested that a 33% price cut would entail a cut in “C sugar” to about 1.3 million tonnes in
2008/09.
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(currently 3 million tonnes). The production reduction may be partly offset by access
to an additional amount of 1 million tonnes of quota subject to a one-off levy. This
additional amount will be taken up by the most important C sugar producers (France,
Germany, Netherlands, Belgium, United Kingdom etc.).
An accurate assessment of the number of factories that could remain in business and
their production potential is not possible. As it relates to the strategic development
plans of the companies concerned this information is confidential.
5.1.3.3. Out of quota sugar
However, under current arrangements there will be other opportunities for the sugar
sector. For instance, sugar beet should qualify for set-aside payments, when cultivated
as a non-food crop, and also be made eligible for the energy crop aid of € 45/ha
provided for under the 2003 CAP reform. However, sugar beet will compete with
cereals for bioethanol and will not change the ratio of biodiesel in biofuels. Finally,
sugar used by the chemical and pharmaceutical industries will not be included in the
production quotas and could represent an additional outlet of about 500 000 tonnes.
5.1.3.4. Acceding countries
The potential impact of the proposed reform on the sugar sectors in Bulgaria and
Romania has been assessed. On the basis of the limited information available, it may
be expected that Bulgaria sugar beet production could remain at the negotiated quota
level of 4 752 tonnes, while in Romania sugar beet production could decline
substantially.
5.1.4.
Overall economic impact
Projected production under quota with the “No Reform” option is estimated to fall by
up to about 11.4 million tonnes by 2013, that is, 6 million tonnes less than current
production under quota (see Table 4). This decrease in production is explained by the
fact that, as a result of increased imports from EBA countries, the EU sugar quota
system would work directly to achieve market balance, through market adjustment,
by reducing production under quota. EBA imports are estimated at 3.5 million t by
2012/13, while EU institutional prices are only technically adjusted to € 560/t, i.e.
minus 11%.
Furthermore, projected exports have been set taking into account the WTO panel
outcome and a Uruguay Round II scenario. Export refunds have been reduced in
accordance with the negotiating position (i.e. phased out over 10 years) and will still
have to cover the entire difference between the EU institutional price and the world
price.
Estimated developments in production under the current legal proposal stem from the
combined effects of the price cut and the attractiveness of the unit amount of the
restructuring aid (€ 730/tonne) during the first two years of the reform, which should
lead to a net production under quota falling of about 5.2 million tonnes. Under these
assumptions, by 2012/13, sugar production under quota in the EU-25 would be about
12.2 million tonnes, that is, 0.8 million tonnes more than under the “No reform”
scenario. Furthermore, sugar beet cultivation would be concentrated in the most
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competitive regions, a pre-condition for making the EU sugar industry sustainable in
the long term.
Table 4
EU-25 Sugar Balance under Proposed Reform and
“No reform” scenarios in 2013
Base year
2012/13
Reform
PRICES
Institutional price
Cumulative reduction in institutional price*
QUANTITIES
Consumption
Quota
Cumulative increase in isoglucose production
Estimated EU production under quota
C sugar production
Total EU-25 production
Total imports
of which ACP/India
of which EBA/SPS
of which MFN
of which Balkans
Total exports
of which Non Annex 1
of which A & B with refunds
of which eq. ACP
(mio t)
(mio t)
(mio t)
(mio t)
(mio t)
(mio t)
(mio t)
(mio t)
(mio t)
(€/t)
631,9
385,5
39%
2012/13
No-Reform
560,0
11%
(mio t)
(mio t)
15,9
17,4
-
16,7
3,0
19,7
2,3
1,3
0,2
0,1
0,3
3,1
0,4
1,1
1,6
16,0
[17,4]
0,3
12,2
-
12,2
3,9
1,3
2,2
0,1
0,3
0,4
0,4
0,0
0,0
16,0
[17,4]
0,0
11,4
-
11,4
5,2
1,3
3,5
0,1
0,3
0,6
0,4
0,2
0,0
* technical reduction of 11% on Intitutional prices in the No-reform scenario
On the import side, an increase in imports of 1.6 million t, from 2.3 to 3.9 million t of
sugar, from preferential partners, is forecast. Given a stabilisation of the import
regime for the Western Balkans, the main driver of the increased level of imports
would be the impact of the zero tariff arrangements of the EBA initiative for the
LDCs.
In such estimates, a major role may be played by “swap” trade flows, on the level of
which there remains a lot of uncertainty. Swaps depend on world market and EU
prices, and freight costs. The theoretical maximum production volume of 2.5 million
tonnes, interested by swaps, is derived as a function of the production capacity of the
current EBA net exporters (e.g. Malawi, Zambia, Ethiopia, Sudan and Mozambique)
plus the production level of current EBA net importers.
Some ACP protocol countries will have to reduce their exports and/or to use the swap
system to keep supplying the EU. Shortfall from some of them will be replaced by
low cost producers such as Swaziland, Zimbabwe, Zambia, Malawi, and
Mozambique. Thus, as a whole, ACP would continue to supply the 1.3 million tonnes
they are committed to.
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On the export side, as a consequence of the substantial reduction in the overall level
of EU production, EU subsidised sugar exports are projected to be zero in 2012/13.
5.2.
Social impact
As regards farmers, the direct decoupled payment will act as an income support from
the first year of the reform implementation, being based on 60% of the difference
between current and final sugar beet prices.
In some countries (Greece, Spain and, to some extent, Italy) sugar beet will be
substituted by cereals, mainly maize and wheat, even if there might be significant
differences within MS at regional level, i.e. in southern regions sugar beet will be
substituted by maize in the irrigated areas and wheat in the dry ones. In Nordic
countries the coupled supplement that can be granted for drying cereals and oilseeds
will also influence farmers’ decisions. Moreover, in certain regions, farmers’
decisions will depend on their ability to gain efficiency in production by improving
yields and reducing costs.
The impact on agriculture employment will be much less accentuated than in the
processing industry. Reductions in farm employment levels will come mainly from
replacing beet production with less labour-intensive alternative crops.
As regards sugar manufacturers, less competitive factories will resort to the
restructuring scheme and cease their sugar beet processing activity. Thanks to the
restructuring aid, they will be able to invest the related capital in other economic
activities, which would not be the case under the “No Reform” scenario.
In the context of the proposed reform, production under quota is projected to be
0.6 million tonnes higher than under “No Reform” scenario. Therefore, employment
losses are expected to be less, since the reform leads to an increase in the sugar
industry’s competitiveness.
6.
6.1.
M
ONITORING AND EVALUATION
Monitoring
In order to ensure good governance and monitor the management of the sugar CMO,
the Commission services will follow, particularly, certain aspects of the EU sugar
sector in the foreseen reform period (2006–2013):
•
evolution of the sugar market economy (production, imports, exports and
consumption; EU and world price trends);
•
development of EU sugar production structures (agricultural holdings, sugar
factories, refineries);
•
incorporation of sugar beet growers into the 2003 CAP Reform process, in
particular their inclusion in the single payment scheme.
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6.2.
Evaluation
In compliance with the Commission's rules on evaluation, the impact of the reform of
the sugar sector will be entered in DG Agriculture’s (ABB) activities, to be evaluated
in the multi-annual evaluation programme.
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