EU Sugar-Beet Growers Seek to Export Surplus After Price Surge

European Union sugar-beet growers want higher export limits as they seek to sell a surplus into a global market where shortages caused prices to double in a year.

EU beet-grower groups meet in Brussels today to discuss how to avoid accumulating sugar stockpiles, said Alain Jeanroy, director general of the French planters federation. The European Commission, the executive arm of the 27-nation EU, has no plans to loosen export limits for now, spokesman Michael Mann said.

Beet growers in France and Germany, Europe’s top producers, expect the biggest harvest since 2006, when the EU changed its sugar policy to comply with a World Trade Organization ruling limiting exports. Prices have jumped this year, reaching the highest level in at least two decades today, as bad weather hurt the harvests in Brazil and India, the largest producers.

“There’s room in the world market and we can’t sell,” said Eric Lainé, who has a 160-hectare (395-acre) farm north of Paris and is president of France’s beet-planters federation. “It’s an enormous frustration.”

The global sugar supply shortfall is estimated by broker Czarnikow Ltd. at 13.5 million metric tons in the 2009-10 season, enough to make about 386 billion cans of Coca-Cola.

Farmers such as Lainé may have to sow less because his record crop, buoyed by a warm summer and advances in plant breeding, threatens to add to an EU sugar glut. French beet growers, whose yields are at 50-year highs, estimate this year’s EU oversupply at 550,000 tons.

‘Exporting More’

“We’re looking for possibilities to export a little bit more than the present quantities,” Dieter Langendorf, the head of German sugar-industry group WVZ, said by phone Dec. 11. “We’re in favor of exporting more.”

French Agriculture Minister Bruno Le Maire told the country’s beet planters’ general assembly in Paris on Dec. 8 that he planned to discuss with the commission how to avoid flipping this year’s surplus into 2010.

“Storing 550,000 tons of sugar when the global market has a shortage is a little absurd,” Jeanroy said.

EU regulations mean farmers can produce no more than 13.3 million tons of sugar for food for the domestic market, and surplus beet is considered out-of-quota and turned into export sugar or products such as ethanol.

“For the time being it is not foreseen to authorize the export of out-of-quota sugar in excess of the fixed quantitative limit,” European Commission spokesman Mann said Dec. 10, in response to e-mailed questions.

Subsidized Sugar

The WTO ruling limits EU exports of subsidized sugar to 1.37 million tons. The commission on Nov. 5 raised the volume of sugar eligible for export this season to 1.35 million tons from 650,000 tons. Even after the increase, more than a half-million tons is destined to sit in warehouses.

“The carry-over of surplus sugar in the EU is inevitable as it is not possible to export out-of-quota sugar in excess of the WTO limit,” Mann said.

Because white, or refined, sugar is trading at about $639 a ton, more than the EU’s reference price of 404.40 euros ($593), the EU may be able to increase exports, according to Robert Ackrill, a lecturer at Nottingham Trent University in England. The reference price is the basis for negotiations with importers and the sale of intervention stocks.

“If world prices are now above reference prices and exports can be undertaken without subsidy, then obviously the WTO limits don’t apply,” said Ackrill, who has published work on the WTO case and European farm policy.

Brazil, Australia and Thailand, whose WTO complaint led to the EU sugar reform, probably wouldn’t challenge an increase in exports because prices are so high, said Adrian Kay, a professor in public policy and management at Salford Business School, England. The EU may still not wish to lift exports because it would create a precedent, he said.

“The price is high and the world is crying out for sugar, we have sugar but we’re not allowed to supply,” said Gert Sikken, in charge of beet purchasing at Dutch producer Suiker Unie. “That is hard to swallow.”

source: bloomberg