Sugar producers urge EU to delay quota abolition

Apr 11, 2015 News

– complains about slow cash support

By Leonard Gildarie
A decision by the European Union to open up the sugar market and slash prices

Sugar prices on the world market as of yesterday.

is continuing to have dire effects on affected small states.
The African, Caribbean, and Pacific Group of States (ACP), of which Guyana is a member, said Thursday, that it is deeply concerned with the sharp decline in the sugar prices which has come much sooner than expected.
In face of pressure of its beet sugar producers, EU which is the biggest buyer of the sweetener, decided a few years ago that it was ending a long standing agreement which allows small states to sell at preferential prices and under a quota system.
A phased cut in prices, accumulative of more than 35 percent, was introduced. Guyana was one of the ACP countries affected.
Europe had introduced cash assistance to help sugar producing countries to recover.
According to the ACP yesterday, the low prices currently on the world market is the direct consequence of the imminent abolition of EU sugar production quotas which the body had strongly objected to.
Yesterday, the world prices were just under US$0.13 per pound, sliding from US$0.30 in 2011.
ACP urged that EU consider a longer timeline to abolish the quota system to allow small states to prepare.
“The ACP had called for a longer timeline to allow the fragile sugar industries to

Skeldon sugar factory, Corentyne, Berbice.

implement in full the on-going massive restructuring and reform programme with the support of EU funds. The EU Beet Growers Confederation had also supported the extension of the quota regime to at least up to 2020.”
The ACP Secretariat said that the majority of its sugar-supplying states have initialed and signed Economic Partnership Agreements (EPAs) with Europe based in part on the expectation of the long-term outlook for the EU sugar market, in terms of access and maintenance of stable and remunerative sugar prices in a regulated EU sugar market.
Premature
The small states body said that the premature abolishment of the quotas contradicts longstanding agreements.
“The EU decision to abolish sugar quotas prematurely therefore seems to contradict and undermine the EPA objectives and the concept of policy coherence for development to which the EU is strongly committed, and which is a fundamental aspect of the Cotonou Partnership Agreement.”
The ACP Sugar Group reiterated that the value of the preference enshrined in these treaties depends on a combination of a guarantee of access and stability of price in the EU market and has long been crucial to the security of ACP sugar export earnings.
“These, in turn, underpin the ability of many of the small and vulnerable economies to import other products, which help to provide food security. More importantly, thousands of small sugar growers in ACP countries continue to depend on these earnings for their livelihood. The importance of this key commodity to Economic Partnership Agreement signatories and the Least Developed Countries has been set aside in the latest EU sugar reform of 2013.”
The ACP Sugar Group said that it is also apprehensive of the planned greater alignment of EU prices with world market levels which is imminent, and, according to the EU’s own forecast, will be at levels rendering the preferences granted under the EPA almost, if not completely, valueless.
“Planning and investment decisions for sugar cane require a view of market conditions well beyond 2017. The ACP Sugar Group is concerned that several imminent intertwined factors could materially influence their prospects as sugar suppliers to the EU.”
The ACP statement, however, made it clear that it appreciates the innovative accompanying support programme, initiated and funded by the EU, granted to the former ACP sugar protocol States.
Slow Disbursement
But it warned that the slow release of the funds is a problem. “However, significant constraints relating to implementation in terms of management and slow disbursement of the funds continue to pose serious challenges. The support programme is far from providing the so called “soft landing” as has been widely claimed.”
The ACP countries said that they have consistently warned the EU that the abolition of EU sugar production quotas in 2017 will lead to drastic price reductions and major market instability which will seriously undermine the substantial investments in the reform and adaptation processes of their sugar industries.
“The ACP sugar suppliers strongly believe that they would continue to need additional support to complete the much needed reform programmes already underway to allow them to genuinely attain a level of competitiveness in order to face the market challenges.”
Guyana would be paying keen attention to the ACP warnings because it is badly affected by the price cuts and removal of the quota systems in 2017.
The sugar industry has been a major thorn in the side of the Guyana Government, recording poor production in the last decade or so.
The flagship US$200M Skeldon factory has continued to churn out dismal figures, underperforming and requiring more than double the amount of cane required by older factories to produce sugar a tone of sugar.
Government has been forced to sell out cane lands and even a new power plant belonging to the Guyana Sugar Corporation to raise cash.
More than US$50M has been plugged into GuySuCo in the last couple years to help pay debts and salaries and other overheads.