The EU sugar sector is entering a new period in its development with the abolition of sugar production quotas: boosting production at the same time as domestic consumption is contracting; lowering average prices; and doubling exports at the same time as imports are halved. This will impact not only on domestic EU markets but also international markets, given the growing global orientation of EU sugar companies and the increased price competitiveness of EU sugar production. This will transform the market context facing ACP sugar exporters as well as the competitive position of ACP producers on regional markets. This will make the continued use of non-tariff trade policy measures a critical policy issue. This adverse market situation will be compounded by the market effects of Brexit, a policy development not yet factored into EC projections given the uncertainty surrounding the final EU27/UK post Brexit trade arrangements. Read more “Dramatic Changes Ahead in the EU Sugar Market”
While the meeting dealt with market access obligations, this focused on the obligations of Pacific signatories towards the EU. There was no discussion of the implications of the UK’s withdrawal from the EU on the value of the market access enjoyed by Pacific signatories to the EU under the EPA. With the prospects for a ‘hard BREXIT’ increasing, getting to grips with the implications for the value of EPA market access for Pacific EPA signatories in the absence of the UK would appear to be some important issue for discussion at the next Pacific-EU EPA Trade Committee meeting. Read more “EU Pacific EPA Trade Committee Meet, but with no discussion of the impact of BREXIT”
Health based campaigns to reduce ‘hidden’ sugars in food and drink products are gaining ground across the globe. This is beginning to impact on global sugar consumption, global consumption is projected to fall over 700,000 tonnes in the coming year despite the current low prices. The trend towards reduced sugar use in food and drink products is being aided by the development of alternative sweeteners which are better suited to use in processed food and drinks. In this context individual ACP sugar exporters will need to develop a better understanding of which components of the market their exports serve and if necessary, develop market repositioning initiatives aimed at reducing their vulnerability to the current health campaigns which are targeting high sugar content food and drink products. Read more “Sugar Reduction Campaign Taking Hold Globally”
While USDA maintains EU sugar prices will need to fall if EU projections for growth in sugar exports in the post-quota period are to be met, this neglects the long experience EU sugar companies have of operating within a dual price system. It is possible substantial price premiums could be maintained on the EU sugar market, with this raising the issue of what regulatory initiatives are required to ensure traditional ACP suppliers share in any EU sugar market prices premiums. This would appear to require an extension of the EC’s current regulatory initiative on UTPs to ACP-EU sugar supply chains. This could potentially include regulatory requirements mirroring those which govern relations between domestic EU sugar beet growers and EU sugar beet millers. Read more “USDA projects lower EU sugar price post production quota abolition”
Projected global sugar price trends are unlikely to support EU sugar prices in the post quota abolition period. Caribbean and pacific ACP sugar exporters will be potentially the most vulnerable to EU price declines over the 2017/18 season. This situation could then be compounded by the sugar market effects of the UK’s withdrawal from the EU, currently scheduled for 30th March 2019. These effects however may be deferred following Prime Minister May’s acceptance that during the implementation period (transitional period) UK/EU27 trade would need to take place within ‘the existing structure of EU rules and regulations’.
Nevertheless there remain profound policy uncertainties around UK sugar market developments which make any projections of likely developments hazardous. Against this background over the coming years ACP sugar exporters will need to closely monitor developments in the Brexit negotiations and the evolution of UK’s autonomous trade policies as they impact on the sugar sector, in order to identify and exploit any market opportunities which might emerge. Read more “Global Market Context Far From Favourable in the Context of the End of EU Sugar Production Quotas”
An additional area of impact of Brexit which has to date been neglected when considering the consequences for ACP countries arising from the trade displacement. This would arise from two inter-related development: firstly the possible introduction of MFN tariffs on mutual EU27/UK trade in agro-food products; secondly the impact of new UK trade deals on the market position of EU27 suppliers on the UK market. Both of these developments could see export drives targeting ACP markets in the most seriously affected products, from sugar and dairy products to beef and poultry meat. Read more “Brexit and Trade Displacement: Areas of Concern for ACP Countries”
Campaigns to reduce the sugar content of food and drink products are gaining traction with consumers, while coordinated efforts are underway to promote greater use of alternative sweeteners within the food and drink industry. The success of efforts to reduce ‘hidden sugars’ however will be strongly influenced by the UK’s future sugar sector trade policy. UK sugar tariff reductions post-Brexit could slow down current efforts to reduce sugar usage in food and drink products, undermining public health policy objectives.
The trend towards a reduction in the sugar content of processed food products is gaining ground amongst EU consumers. According to analysis from Mintel ‘consumers in European markets are cutting their consumption of sugar – in Poland and Spain 63% are actively reducing consumption or avoiding the ingredient altogether. Some 60% of Italians are doing the same, as well as 55% of French consumers and 54% of Germans’ (1).
Research commissioned by the labelling organisation Sugarwise found 73% of shoppers said they ‘might or would definitely switch from their usual brand to one carrying the Sugarwise logo’. Sugarwise certifies ‘food with less than 5g of free sugars per 100grams and drinks with less than 2.5g per 100 ml’. Sugarwise is expanding its activities to mainland Europe after initially launching in the UK (1).
The move towards reduced sugar usage in food and drink products will be facilitated by the initiative launched by the UK Food and Drink Federation (FDF) and the British Retail Consortium (BRC) to bring together data and analysis on the range of sugar alternatives and their practical use in different food and drink product manufacturing activities.
Ingredient manufacturers and researchers are being invited to provide details of products which would assist with industry reformulation efforts, aimed at reducing ‘hidden sugars’ in food and drink products without compromising the quality, taste, safety or shelf life of the product. The initiative is explicitly aimed at taking food and drink industry reformulation efforts to the ‘next level’, in response to Public Health England’s guidelines and the UK government’s Childhood Obesity Plan, which targets a 20% reduction in sugar consumption by 2020 (2).
Meanwhile Sugarwise has called on the UK government post-Brexit to apply differential import tariffs, based on the sugar content of products imported into the UK. It has called for low or no-sugar brands to enter the UK market free of tariffs. This is seen as necessary to address the current reality that ‘healthier products …tend to be more expensive’ (1).
|Comment and Analysis
While the practicality of the proposals advanced by Sugarwise for the application of differential tariffs on food and drink imports based on their sugar content may be questioned, it does raise the broader question of the consistency of any UK government moves to liberalise access to the UK sugar market post-Brexit with government health policies aimed at reducing per capita sugar consumption both by imposing taxes based on the sugar content of products and through voluntary guidelines on sugar reduction in manufactured food products (see companion article ‘Multiple challenges pending for ACP sugar exporters’, 1 May 2017).
This issue of how the UK government plans to reconcile its public health objectives related to reducing ‘hidden sugars’ in food and drink, with pressures to liberalise import tariffs on agricultural products such as sugar, will be critical to the future pace of the erosion of the value of any preferential access which ACP countries may be able to reconsolidate on the UK for their sugar exports in the post-Brexit period.
Currently scheduled EU reforms are projected to reduce sugar prices on the EU market. However within 18 months, if current sugar sector tariffs are retained and the UK’s exit from the EU is mishandled such that MFN tariffs are introduced on UK/EU27 mutual trade, then UK sugar prices could recover strongly. At present EU27 suppliers provide around 20% of UK sugar consumption (mainly from France and Holland). This trade would grind to a halt if MFN duties were imposed on mutual UK/EU27 trade (see companion 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). In this context, with expanded UK beet production likely to meet only 15% of UK consumer demand by 2019, sugar shortages could emerge with disproportionately high increases in UK retail sugar prices occurring.
This could create new opportunities for ACP sugar exporters to the UK, if public health concerns around ‘hidden sugars’ were to outweigh the lobbying efforts of Tate & Lyle Sugar to secure a removal of current import duties on world market priced sugar (see companion article ‘What are the implications for ACP sugar producers of Tate & Lyle Sugars expectations on UK sugar sector policy post-Brexit?’, 10 April 2017) and UK Department of International Trade (DIT) efforts to fast track the conclusion of FTA arrangements with major developing country groupings such as those in the Mercusor Group.
(1) Foodnavigator.com, ‘Healthiest products should be tariff free post-Brexit, says Sugarwise’, 25 August
(2) Foodnavigator.com, ‘FDF-BRC-back-coordinated-approach-to-sugar-reduction’, 21Augusts 2017
|Key words: Sugar, Food and Drink Federation, British Retail Consortium, Sugarwise
Area for Posting: Sugar, Brexit
The planned growth in beet production by Tereos growers in France and the expansion of sugar production in the Czech Republic, alongside concerns over a possible Brexit related disruption of exports to the UK is seeing a major international export drive being launched. While South Asia the main target market, a sales office has also been opened in Nairobi. Tereos also has an expanding sugar cane production presence in East Africa. These developments could greatly increase competition for less competitive African sugar producers.
Expanded EU sugar exports could also contribute to stalling ant recovery in global sugar prices, which would be bad news for all African sugar exporters, given EU price developments will increasingly shadow world market price trends post sugar production quota abolition. Read more “Tereos Expanding its Presence the East African Sugar Sector”
The EC is currently undertaking consultations on new proposals to reduce unfair trading practices (UTPs), to which farmers are seen as being particularly vulnerable. UTPs are seen as stifling innovation and undermining on-farm investment through reducing the commercial viability of farming activities. The envisaged regulations aim to ensure a fairer distribution of value along agricultural supply chains, and increase both farm incomes and on-farm investment.
There is an urgent need to extend EU regulations on UTPs to ACP-EU supply chains since in some major sectors abuses of the weak market position of smallholder producers are endemic. Investments in poverty focused export orientated smallholder production will be undermined unless issues of UTPs along ACP-EU supply chains are addressed. Read more “Proposed EC Regulatory Initiative on UTPs Needs to be Extended to ACP-EU Supply Chains”
While the EU has been urged to ‘take a more active role in trying to shape a Brexit outcome that is least damaging to its interests’, the ACP Group needs to ensure this approach is extended to the EU’s traditional developing country partners such as the ACP Group. It is becoming increasingly apparent that for major ACP agro-food export product groups, Brexit could have a major impact on the functioning of existing ACP supply chains currently serving the EU28 market. This needs to be fully assessed so that as the Brexit negotiations develop the key priorities for administrative and regulatory initiatives and marketing adjustment support are identified. Read more “Hard Brexit Could Severely Disrupt EU27-UK Agro-Food Sector Trade”