European Commission Changes in support of sugar production in the EC

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Publications : Agriculture : Sugar



Support of the EC sugar Industry

COM(2004) 499 final, Brussels, 14.7.2004 (184 Kb PDF)

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT accomplishing a sustainable agricultural model for Europe through the reformed CAP - sugar sector reform.

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The EU sugar reform, came into force on 1 July 2006. This followed the formally adoption of a radical reform of the EU sugar sector in February 2006.. The reform will bring a system which has remained largely unchanged for almost 40 years into line with the rest of the reformed Common Agricultural Policy. It aims to ensure a long-term sustainable future for sugar production in the EU, enhance the competitiveness and market-orientation of the sector and strengthen the EU's position in the current round of world trade talks. The key to the reform is a 36 percent cut in the guaranteed minimum sugar price, generous compensation for farmers and, crucially, a Restructuring Fund as a carrot to encourage uncompetitive sugar producers to leave the industry.

The fund is sourced by payments by sugar, isoglucose and inulin producers according to their production quota. Producers who give up production may benefit from restructuring aid from the fund. The amount of the restructuring aid varies according to the degree of dismantling of production facilities and will be reduced gradually over the four-year restructuring period. The fund and the programme will be closed after four years.

The objective is to take out about 6 million tonnes of quota in order to ensure balance on the market after the transition period. In the first year of application, about 1.5 million tonnes of quota were renounced under the restructuring scheme. This means that by the start of the marketing year 2006/2007 on 1 July 2006 quotas were reduced by 1.5 million tonnes. Each tonne of quota renounced was compensated with 730 €/t from the restructuring fund. This is also the level 2007/08, but the restructuring aid then falls to 625 €/t in 2008/09 and 520 €/t in 2009/10, the fourth and final year. Sugar enterprises unable to produce at around 400 €/t should take advantage of the restructuring aid this year, while it is still set at 730 €/t.

However, at the end of 2006 the declared intentions to renounce quota for 2007/2008 amounted to only 0.7 million tonnes which is far less than what is necessary to balance the market. I f the situation does not change a linear cut in quotas may be brought in.