Deep cuts in beet prices proposed for sugar reform

DEEP cuts in beet prices and an industry funded restructuring scheme form the basis of reform proposals for the sugar regime formally tabled by EU commissioners in Brussels today (Wednesday, June 22).

In line with previous leaks, the commission is seeking a 39% cut in the sugar price to €385/t (£258/t) and a 43% drop in the beet price to €25.5/t (£17/t).

These will impact over two years starting in 2006/07, with compensation to growers set at 60% of the price fall.

The reform has been made necessary by the impending flood of imports under the everything-but-arms agreement, and the recent WTO ruling that substantial parts of the EU’s subsidised exports were illegal.

The commission has estimated that the price cuts will lead to EU sugar production falling from 20m tonnes to 12.4m tonnes by 2012.

There will be no compulsory quota cuts. But there will be an industry funded restructuring scheme to encourage the EU’s least efficient processors to quit.

This will pay some €730/t (£489/t) in the first year to encourage factories to close and to surrender their quota.

By year four the rate will have dropped to €420/t (£281/t).

The scheme will be funded by a levy on quota holders, decreasing over three years.

A and B quota will be merged, while the cross border movement of quota has been abandoned in the final proposal.

But the commission is offering up to 1m tonnes of C quota for member states to purchase at the same €730/t (£489/t) as applies to restructuring.

Around 8% of this will be available to the UK.

The EU produced around 3m tonnes of C quota last year, so the 1m tonnes now available will still contribute to a net reduction in output.

Sugar beet is also being counted as a non-food crop for set-aside land and will be eligible for a €45/t (£30/t) energy premium.

Growers have reacted with deep concern to the announcement.

Lincolnshire grower Mark Ireland predicted that 75% of UK growers could be forced out of production unless the price cuts were reduced.

And Andrew Symonds from Worcestershire said that, if the compensation is included in the single farm payment, the sums available to growers would be grossly diluted.