8 December 1995

Sugar quota blame

EUROPES sugar industry is losing its competitiveness after the Brussels decision to roll over the existing support regime for another six years.

That was the claim at last weeks Agra-Europe sugar conference in London as sugar users complained of continuing high prices and guaranteed margins for processors.

Leading the challenge, Walter Brinkmann, of Coca-Cola International, put the blame on quotas, which, he claimed, had fossilised the industry. They stopped the movement of production from inefficient areas to efficient ones. "The recent introduction of sugar beet to Portugal is a clear illustration of the absurdity of the system," he said.

In particular, he pointed to the guaranteed margins for processors. "For 1994/95 beet prices were fixed at about £41/t, equivalent to £31/100kg of sugar. With the intervention price of sugar at £54/100kg, that left a guaranteed margin of over £20," he claimed.

With 10 companies controlling 70% of output in the EU, and with regional price differences compensating for local inefficiencies, there were few incentives to improve productivity, he said. The cost of this was borne by consumers.

Dismantling the guaranteed margin was a high priority but it need not lead to falling farm incomes, said Mr Brinkmann, so long as the commission targeted sugar intervention prices rather than beet prices.

But these suggestions were dismissed by EC head of sugar, Ejner Stendevad, who said the existing regime had been extended by farm ministers because it had been shown to work and was self-financing.

Import protection

And it was not true to say nothing had changed. GATT provisions meant that import protection would fall by 3.3% a year for the next six years and export subsidies by 6% a year. He believed extra imports would have no impact for the next two years but could then lead to pressure for support price or quota cuts.

But Patrick Chatenay, director of French processsor, Generale Sucriere, denied the processing industry was feather-bedded. "My company made a loss in 1986," he said. "Since then we have halved the workforce, cut costs and improved productivity. We have worked hard to make our company profitable."