French Exporters Lead The Charge for African Sugar Markets
Summary
The dominant role which French companies play in the expanding EU export trade in sugar to ACP countries is potentially a matter of major concern to efforts to develop intra-African trade in sugar. French companies are highly exposed to sugar exports to the UK, with any loss of the UK market arising from a ‘hard’ Brexit, requiring a 77% increase in French extra-EU sugar exports, if domestic EU27 markets are not to be disrupted by a ‘hard’ Brexit. Such a sudden expansion of EU27 sugar exports to African markets could severely disrupt sugar markets in Africa and the efforts of competitive sub-Saharan Africa sugar producers to expand intra-African trade in sugars. It could also see an intensification of EC pressure on EPA signatories to live up to their trade agreement commitments in regard to the prohibition of the use of quantitative restrictions on imports from the EU.
The lifting of EU national sugar production quotas in October 2017 has seen a major expansion of EU sugar exports to ACP markets, primarily in Africa, In 2017 EU sugar exports to ACP countries increased 150% compared to 2016 and some 279% compared to the average of the preceding four years. This contrasted with ‘only’ a 59% increase in total extra-EU sugar exports in 2017 compared to 2016 and an increase of 55% compared to the average of the preceding four years (1).
Trends in Extra-EU Sugar Exports Total and by ACP regions (2013-2017 – tonnes)
| 2013 | 2014 | 2015 | 2016 | 2017 | % change 16-17 | % share France 2017 | |
| EU Total | 1,411,291 | 1,523,870 | 1,322,704 | 1,369,367 | 2,178,337 | +59% | 26.9% |
| – West Africa | 63,853 | 55,754 | 54,949 | 52,842 | 280,913 | +431% | 69.4% |
| – Eastern Africa | 870 | 4,862 | 7,782 | 35,547 | 89,144 | +151% | 33.0% |
| – Central Africa | 30,303 | 35,515 | 32,090 | 63,598 | 64,613 | +2% | 60.3% |
| – Southern Africa | 261 | 257 | 4,483 | 30,823 | 26,605 | -14% | 0% |
| – Caribbean ACP | 8,785 | 7,575 | 7,475 | 9,099 | 18,324 | +101% | 60.7% |
| Total ACP | 104,072 | 103,963 | 106,779 | 191,909 | 479,599 | 150% | 57.2% |
Extracted from EC Market Access Data Base
French sugar exporters are leading the way in this process of rapid expansion of EU sugar exports to ACP countries. In 2017 ACP countries took nearly 47% of total French extra-EU sugar exports (see table below for details).
French exports to ACP countries represent 57% of EU sugar exports to ACP markets compared to an overall share of French exports in total extra-EU sugar exports of only 27% (1).
French exporters had a particularly strong presence in West Africa accounting for almost 70% of EU sugar exports to the region. This saw West Africa taking fully 1/3 of all French extra-EU sugar exports in 2017 (1).
French sugar exporters also have a strong presence in Central Africa accounting for over 60% of EU sugar exports. In 2017 Central African countries took some 6.6% of total French extra-EU sugar exports (1).
French sugar exporters also have a sudden surprisingly high share of EU sugar exports to the Caribbean accounting for over 60% of EU sugar exports to ACP Caribbean countries (although this was restricted almost exclusively to Haiti). However in 2017 this accounted for only 1.9% of total French extra-EU sugar exports up form a mere 0.2% in 2015 (1).
French exporters are also developing a growing presence in Eastern Africa accounting for 1/3 of EU sugar exports to the region. In 2017 Eastern African market took 5% of total French extra-EU sugar exports, compared to only 0.8% over the 2014-2016 period (1).
Developments in French sugar exports to Eastern Africa are illustrative of the corporate strategies driving these EU sugar export trends.
In June 2017 Tereos CEO Alexis Duval highlighted how the company already ‘does a third of its sales in emerging countries’, with emerging markets likely to grow in importance over time since ‘this is where the market is expanding’ (2). Both West Africa (particularly Nigeria) and East Africa were identified ‘as key growth markets for global sugar producers’. East Africa is seen as having considerable market growth potential for the Tereos Group since ‘given Kenya’s demographic and economic growth, sugar consumption is experiencing a strong increase there and far outstrips domestic production capacity’. These market trends are giving rise to strong local sugar prices in Kenya (3).
It is in this context that in 2016 Tereos established a sales office in Nairobi which aims to ‘increase distribution both in the Kenyan market and in neighbouring countries such as Rwanda and Uganda, which are structural importers of sugar’ (3) (see companion epamonitoring.net article ‘Tereos Expanding its Presence the East African Sugar Sector’, 22 September 2017).
The expanded sugar exports from Tereos have been supported by investments since 2010 in improving the efficiency of its sugar plants and building a dedicated international export logistics centre, which is strategically located in northern France with easy access to the container ports of Dunkirk, Antwerp and Rotterdam. This logistics centre can handle 500,000 tonnes of Tereos sugar exports per annum, targeting expanding markets in West Africa, North Africa and the Middle East. This international export drive is further supported by the broad range of sugars, sweeteners and starch products Tereos can offer (4).
This all needs to be seen in the context of Tereos expanded area under beet and record beet yields, with the volume of sugar beets processed up 30% in the 2017/18 season compared to the 2016/17 season (4). Tereos representatives see EU sugar producers being well placed to compete on an oversupplied global sugar market given ‘production costs are more competitive than rival such as Russia and Pakistan’ (5). Tereos Executive Board member Alexandre Luneau noted how in the case of Tereos higher sugar production was being achieved ‘without any new capacity’ being required through the simple expedient of ‘extending the period during which beet is processed by factories’ (5).
Meanwhile analysis from Reuters has highlighted concerns that ‘the rise in EU production has contributed to … a global supply glut in 2017/18 which has pressured world prices’. It noted how ‘both raw sugar and white sugar prices have shed more than a third of their value in the last year, partly due to the expected boost in EU production’ (5).
Main ACP Markets for Growth in French Exports
| 2014 | 2015 | 2016 | 2017 | % growth 16-17 | France % EU | |
| French Extra EU Total | 371,806 | 367,947 | 300,452 | 586,078 | +95.1% | 26.9% |
| To West Africa | 47,795 | 49,093 | 47,640 | 194,932 | +309.2% | 69.4% |
| Mauritania | 0 | 0 | 44 | 92,750 | 78.4% | |
| Ghana | 2,260 | 3,735 | 8,309 | 24,150 | 56.9% | |
| Senegal | 7,105 | 10,530 | 8,974 | 14,125 | 64.0% | |
| Sierra Leone | 2,616 | 2,490 | 7,388 | 20,672 | 95.1% | |
| Togo | 1,933 | 10,464 | 3,866 | 5,282 | 13.6% | |
| Benin | 7,593 | 10,659 | 5,541 | 9,295 | 52.7% | |
| Mali | 328 | 571 | 335 | 12,819 | 96.3% | |
| Niger | 3,634 | 4,995 | 6,181 | 5,473 | 60.3% | |
| Guinea | 1,558 | 875 | 1,539 | 3,961 | 70.3% | |
| Burkina Faso | 8,226 | 4,331 | 4,706 | 5,638 | 85.5% | |
| – Other West Africa | 15,542 | 443 | 757 | 767 | 25.3% | |
| % Total French Exports | 12.8% | 13.3% | 15.8% | 33.3% | ||
| To Eastern Africa | 1 | 4,998 | 3,045 | 29,390 | +865.2% | 33% |
| Sudan | 0 | 0 | 0 | 20,000 | 35.2% | |
| Tanzania | 0 | 4,231 | 3,009 | 7,080 | 29.3% | |
| Kenya | 0 | 759 | 0 | 1,012 | 30.8% | |
| Somalia | 0 | 0 | 0 | 115 | 4.4% | |
| Uganda | 0 | 0 | 0 | 1,127 | 100% | |
| – Other Eastern Africa | 1 | 8 | 36 | 56 | 10.1% | |
| % total French exports | 0.0003% | 1.4% | 1.0% | 5.0% | ||
| To Central Africa | 16,659 | 15,401 | 32,114 | 38,939 | +21.3% | 60.3% |
| Cameroon | 14,172 | 13,307 | 28,933 | 36,213 | 66.4% | |
| Angola | 0 | 0 | 0 | 0 | 0% | |
| Equatorial Guinea | 1,530 | 938 | 1,841 | 1,590 | 75.4% | |
| Gabon | 936 | 1,019 | 1,310 | 1,123 | 49.3% | |
| – Other Central Africa | 21 | 137 | 30 | 13 | 0.8% | |
| % Total French Exports | 4.5% | 4.2% | 10.7% | 6.6% | ||
| To Southern Africa | 3 | 1 | 10,136 | 1 | -99.99% | 0.004% |
| South Africa | 3 | 1 | 10,136 | 1 | ||
| % Total French Exports | 0.0008% | 0.0003% | 3.4% | 0.0002% | ||
| To Caribbean ACP | 0 | 782 | 0 | 11,130 | New market | 60.7% |
| Haiti | 0 | 0 | 0 | 10,900 | 99.96% | |
| – Other Caribbean | 0 | 782 | 0 | 230 | 3.1% | |
| % Total French Exports | 0% | 0.2% | 0% | 1.9% | ||
| Total ACP | 64,458 | 70,275 | 82,799 | 274,391 | +231.4% | |
| ACP % total French Exports | 17.3% | 19.1% | 27.6% | 46.8% |
Source: EC Market Access Data Base
| Comment and Analysis
While not under-estimating the importance of the investments made in enhancing the efficiency of both EU sugar beet production, handling and processing, the competitiveness of EU sugar exports cannot be entirely divorced from the Single Farm Payment to all EU farmers and the and coupled payments made sugar beet growers in what are nominally seen as disadvantaged production zones (including parts of France) (see the epamonitoring.net companion article ‘Multiple challenges pending for ACP sugar exporters’, 1 May 2017). It is in this context that the concept of competitiveness needs to be seen, since there can be little doubt that in the absence of such public sector support the volume of overall EU beet production would probably be lower. Beyond this issue the dominant role French exporters play in the EU’s sugar export trade with ACP countries is potentially a matter of considerable concern in the context of the complications which are likely to arise in the sugar sector during the Brexit process. Sugar is likely to be one of the most difficult agro-food products to deal with under any EU27/UK free trade agreement negotiations. Given the distorted nature of the global sugar trade, residual nature of the international sugar market and the central role sugar plays in arable production systems in many EU member states, sugar is a highly sensitive product in terms of trade negotiations for the EU. This sensitivity is exacerbated by the growing EU international sugar export trade. The situation in the UK is somewhat different with a structural deficit in sugar production existing. Currently UK sugar consumption needs are met from roughly: · ½ domestic beet based sugar production; · ¼ domestic processing of imported raw sugars; · ¼ refined sugars imported from fellow EU27 member states. The sourcing of cheaper sugar from low priced global markets is seen as one of the major immediate wins from the Brexit process. Indeed, access to world market priced sugar without the imposition of protective EU import duties and levies motivated the UK’s sole traditional dedicated raw cane sugar refiner (Tate & Lyle Sugars) to actively lobby for a yes-vote in the UK Brexit referendum. It has also seen Tate & Lyle Sugars actively lobbying for the early removal of existing EU duties within the process of disengagement of the UK from EU rules and regulations (6). However any UK deviation from the EU’s current common external tariff for sugar is likely to see sugar either excluded from a EU27/UK FTA or special arrangements put in place for trade in sugar and high sugar content food and drink products. The aim of such special arrangements or exclusions would be to ensure only UK originating sugar is involved in UK exports to EU27 markets. The option of special arrangements is likely to prove technically difficult, since it is not just the use of non-originating sugars in goods destined for the EU market which the EC will be concerned about. The EC will also have concerns about the impact of lower duty sugar imports into the UK on price formation in the UK sugar and processed sugar products sector. There will be particular concerns that access to world market priced sugar could unfairly enhance the competitive position of UK suppliers of high sugar content food and drinks on EU27 markets, to the detriment of EU27 sugar producers, processors and value added food and drink product producers. This is a major issue since in the EU around 70% of all sugar consumed in Europe is consumed in the form of processed food and drinks not in the form of direct sugar consumption. The hard reality is that the sugar sector is the sector which is most likely to be subject to some form of ‘hard’ Brexit. The principal UK sugar beet processing company, British Sugar has argued the UK should immediately reciprocate if any tariffs are applied on UK sugar and sugar based product exports to EU27 markets (7). In this context, the very real danger exists that current EU27 sugar exports to the UK market could be disrupted by the imposition of standard 3rd country duties and import controls. However, this would mean the UK would then have to pursue tariff reductions in the sugar sector via bilateral FTAs rather than introducing multilateral tariff reductions, since these would also need to apply to EU27 suppliers. This could see the existing EU27/UK sugar trade grinding to a halt (see companion expamonitoring.net article ‘Agro-Food Sector Effects of the Application of MFN Duties on EU27-UK Trade: An Area of Potential ACP Concern and Opportunity’, 18 August 2017). Since this would primarily affect French sugar producers, the current French export drive which focuses strongly on developing ACP markets is only likely to intensify in the coming years as French companies seek to reduce their vulnerability to a ‘hard’ Brexit in what is a highly uncertain policy context for future EU27/UK trade in sugar. This could then see French exporters pressuring the EC to use existing trade agreement commitments to put an end to quantitative restrictions on EU exports of sugar to the markets of EPA signatory countries. |
Sources
(1) EC, Market Access Data Base
http://madb.europa.eu/madb/statistical_form.htm
(2) Reuters, ‘Tereos sees emerging markets key to growth post-EU sugar quotas’, 22 June 2017
http://www.reuters.com/article/us-france-sugar-tereos-idUSKBN19D1G7
(3) Tereos, ‘One Step Ahead: Annual Report 2016/17’, June 2017
https://tereos.com/sites/default/files/rate016_gb_planche_web.pdf
(4) Tereos,, ‘The Tereos beet campaign 2017/2018 sets a new record in France, as forward planning, innovation and widespread motivation bear fruit’, 20th February 2018
file:///C:/Users/GDC%20Partners/Downloads/pr_-_tereos_beet_campaign_sets_a_new_record.pdf
(5) Reuters, ‘EU well placed to compete in oversupplied sugar market –Tereos’, 5 February 2018
https://www.egypttoday.com/Article/3/42021/EU-well-placed-to-compete-in-oversupplied-sugar-market-%E2%80%93Tereos
(6) UK Parliament, Business, Energy and Industrial Strategy (BEIS) Committee ‘Evidence from food and drink manufacturers warns of dangers of ‘no deal’ – Written evidence from Tate & Lyle Sugars’ (BRF0012), November 2017
https://www.parliament.uk/documents/commons-committees/business-energy-and-industrial-strategy/Written-evidence/written-evidence–Brexit-food-and-drink.pdf
(7) UK Parliament, Business, Energy and Industrial Strategy (BEIS) Committee ‘Evidence from food and drink manufacturers warns of dangers of ‘no deal’ – Written evidence submitted by British Sugar (BTS0008)’, November 2017
https://www.parliament.uk/documents/commons-committees/business-energy-and-industrial-strategy/Written-evidence/written-evidence–Brexit-food-and-drink.pdf