Summary
While the impact of EU sugar production quota abolition is the most immediate concern to ACP exporters given the dramatic decline in EU prices paid for ACP sugar and the 60% decline in ACP sugar export volumes to the EU, the long term trend towards replacing sugar and reducing sugar usage in food and drinks is also a major source of concern. This will lead to an overall reduction in EU sugar consumption in a context where the future scaling back of EU production from record levels in 2017/18 is unlikely to see a return to historical levels of EU imports from ACP countries. This is likely to be compounded by the withdrawal of the UK from the EU. This means ACP sugar exporters will need to look to markets in Asia and particularly for African producers, in Africa. They will also need to look to the more systematic exploitation of non-sugar revenue streams linked to sugar cane production.
The high sweetness sugar technology firm DouxMatok is to ‘partner with German sugar giant Südzucker to produce, market and sell its patented sugar-reducing technology’ in Europe. This will allow DouxMatok access to two major potential customers in Europe who source most of their sugar from Südzucker (1).
‘DouxMatok’s technology ‘uses an inert silica-based mineral carrier onto which sugar molecules are ‘loaded’. This results in a more efficient delivery method, meaning the same sweetness is tasted with 40% less sugar’. Foodnavigator.com reports ‘DouxMatok’s sugar can be used as normal sucrose and is suitable for freezing, heating and baking’ (1).
Production of the silica carried sugar is being expanded at ‘Südzucker’s Ostein plant, near Frankfurt’, with samples being in high demand. The distribution of the samples will start in the final quarter of 2018 with commercial quantities being released in the second half of 2019 (1).
DouxMatok aims to set the price for its product at a comparable level to standard sugar based on its sweetness. Its product has been approved for the European market, although it is unclear how it well it will be received by consumers (1).
This development follows on from the launch in early 2018 of ‘Nestlé’s restructured sugar which can reduce the sugar content in confectionery by up to 40%’ (1).
Meanwhile it is being claimed by Public Health England (PHE) that UK food and drink manufacturers are doing ‘substantially better’ in their efforts to reduce sugar usage than earlier reports suggested (see empamonitoring.net article ‘Sugar Reduction Target Missed But Pipeline of Pending Initiatives Encouraging’, 31 May 2018). Many product innovations introduced in response to the Soft Drinks Industry Levy (SDIL) and voluntary sugar reduction targets, have not yet found themselves onto retailers’ shelves. This has led to an underestimation of the scope of the reformulation and package adjustment efforts which are underway (2).
This being noted, since tackling the obesity epidemic in the UK will require a 2/3 reduction in sugar consumption, Professor Winkler of PHE is not optimistic that the necessary reductions in sugar consumption required from a health perspective can be attained. Against this background he has called on the future post Brexit UK agricultural policy to ‘take into account public health as well as production’ concerns (2)
By July 2018 some 326 UK businesses had registered for the SDIL in a context where all producers, importers and packagers of the drinks subjected to the levy (except small producers) are required to register under the SDIL scheme (3).
From an ACP perspective the emergence of a growing range of sugar alternatives and public policy efforts to curb sugar consumption is occurring against the background of an expansion of EU domestic sugar production which is seriously reducing EU import demand for sugar.
In 2017/18 EU sugar production reached the record level of 21,144,497 tonnes, 26% more than in 2016/17. However lower EU sugar production is forecast for the 2018/19 season, at some 19,179,836 tonnes (7). According to EC analysis ‘two-to-three year contracts do not allow for significant changes in area and price signals came in too late to influence sowing decisions for this marketing year’. Against this background the key determinant of sugar production levels in 2018/19 were climatic conditions during the growing season. It was thus delayed planting, prolonged drought and only belated rains which resulted in the 9% reduction in EU sugar production volumes in 2017/18 (9).
Overall the EC maintains ‘the time gap between price signals and production decisions means that historically low EU sugar prices in 2017/2018 will probably impact production in 2019/2020’. Already some EU sugar companies are repositioning themselves with Royal Cosun in the Netherlands announcing ‘its intention to reduce the harvest by 10-15 %’ and British Sugar in the UK announcing ‘it would be offering only annual contracts from 2019/2020 onwards (9). While this may from around 2020 lead to reduced levels of EU exports, this is unlikely to give rise to historical levels of EU imports from ACP countries given the absence of the UK from the EU market equation.
In the short term with only days to run in the 2017/18 season EC data revealed total EU sugar imports of were around 1,253,000 tonnes, substantially below historical levels.
Total EU Sugar Imports and from ACP/EBA suppliers (2015/16 – 2017/18)
| Season | Total EU Imports | Imports from ACP°/EBA |
| 2017/18 (up to 18/9/2018) | 1,253,000 | 521,000 |
| 2016/17 | 2,969,000 | 1,324,000 |
| 2015/16 | 2,989,000 | 1,608,000 |
° excluding South Africa
Source: EC ‘Sugar trade statistics’ reporting
According to EC data, ACP/EBA countries accounted for 41.6% of these imports (around 521,000 tonnes), with this being substantially down on the 1,262,000 tonnes of ACP/EBA sugar exported to the EU over the corresponding period in the 2016/17 season (1,324,000 tonnes for the whole of the 2016/17 season). South Africa meanwhile following the granting of a new bilateral TRQ under the EU-SADC EPA finalized in October 2016 accounted for 17% of EU imports (around a further 213,000 tonnes) (5).
This reduced EU sugar import demand has thus profoundly affected traditional ACP sugar exporting countries with export volumes down 58.7% (5). This has been compounded by the fall in average price paid for ACP raw sugar, which had fallen to €330/tonne in July 2018 average EU sugar prices. This contrasts with prices of around €526/tonne in July 2017 (around a 37% decline year on year) (6). This being noted, given depressed global sugar price levels in July 2018 the EU market still offered a €62/tonne price premium compared to world market prices.
According to the EC Sugar Market Observatory only a moderate price recovery in EU sugar price is likely in the medium term (4), although an increase in the white sugar price premium is already underway, benefiting ACP exporters such as Mauritius and to a limited extent Swaziland and South Africa.
| Comment and Analysis While ACP sugar exporters have understandably focused on the impact of EU quota abolition on the market situation in the EU (particularly as this affected exports to the UK market), of longer term concern is pressure to reduce per capita sugar consumption and the emergence of enhanced sweetness sugar formulation and alternative sweeteners. This is likely to halt growth in EU demand for sugar and indeed lead to an overall contraction in EU sugar consumption. In December 2017 the EC projected a decline in EU sugar consumption of 4.9% between 2018 and 2030 (a loss of some 900,000 tonnes of EU demand), even without fully factoring all pending public policy initiatives to reduce sugar consumption in processed food and drink (8).Developments in sugar consumption in the UK are particularly significant since the UK accounted for around 35% of total extra-EU sugar imports in the first 10 months of the 2017/18 season, with the % share of UK imports of sugar from ACP countries being even higher at around 50%. Particular difficulties have been faced by ACP sugar exporters on the UK market in the face of growing competition from EU27 white sugar exporters following the abolition of EU sugar production quotas (see companion epamonitoring.net article ‘EU Sugar Quota Abolition Begins to Eat at ACP/LDC Export Volumes and Earnings’, 10 May 2018). Belize, Guyana and Fiji have a particularly high dependence on the UK market, with Belize accounting for 2/5th of UK imports from ACP sources in the 2017/18 season (excluding South Africa). This long term trend strongly suggests ACP sugar exporters will need to increasingly look to non-EU market to secure profitable outlets for their sugar production. In the Pacific this will increasingly need to focus on rising sugar demand in Asia. In Africa while rising Asian demand could also be served of even greater importance could be the growing demand for sugar in Africa itself. In this latter regard moves towards regional trade integration and the creation of a pan-African FTA could have a role to play. It is against this background that particular concerns arise in regard to the rapid growth in EU sugar exports to African markets which has been underway in the past 3 years (see companion epamonitoring.net article ‘EAC Sugar Sector Continues to Seek Protection and Effective Management of Sugar Imports’, 8 November 2018). Similar concerns arise in the Caribbean in regard to increased sugar imports from the EU in a context where imports increased 145% between 2015 and 2017, with the main markets becoming Haiti, Barbados and Surinam. Trends in EU Sugar Exports to Caribbean ACP Countries
Source: EC Market Access Data Base Looking to the future ACP sugar producers will also need to more fully develop non-sugar based revenue streams linked to sugar cane production. While developing strategic partnerships with EU sugar companies can facilitate this process through technology transfer, such partnerships could also serve to hold back efforts to move up the sugar value chain serving global markets, where such efforts would increase competition for exports of the partner company. In this context African governments will need to adopt a nuanced approach to the promotion of EU sugar sector investment in national sugar sectors. |
Source
(1) Foodnavigator.com , ‘DouxMatok Südzucker bring sugar tech to Europe: ‘We want to be like Intel Inside, powering industry’s sugar reduction,’ says CEO, 1 August 2018
https://www.foodnavigator.com/Article/2018/08/01/DouxMatok-Suedzucker-bring-sugar-tech-to-Europe-We-want-to-be-like-Intel-Inside-powering-industry-s-sugar-reduction-says-CEO
(2) Foodnavigator.com, ‘UK food industry is not failing on sugar reduction targets says expert’ 2 July 2018
https://www.foodnavigator.com/Article/2018/07/02/UK-food-industry-is-not-failing-on-sugar-reduction-targets-says-expert
(3) Beveragedaily.com, ‘UK sugar tax: 326 businesses hit by soft drinks industry levy’, 17 July 2018
https://www.beveragedaily.com/Article/2018/07/17/UK-sugar-tax-326-businesses-hit-by-soft-drinks-industry-levy
(4) EC Sugar Market Observatory, ‘Meeting Summary’ 3 July 2018
https://ec.europa.eu/agriculture/sites/agriculture/files/market-observatory/sugar/reports/2018-07-03-report_en.pdf
(5) EC, ‘Sugar Trade Statistics’, AGRI G 4 Committee for the Common Organisation of Agricultural Markets, 27 September 2018
https://ec.europa.eu/agriculture/sites/agriculture/files/market-observatory/sugar/doc/trade-statistics_en.pdf
(6) EC, ‘Sugar Market situation’, AGRI G 4 Committee for the Common Organisation of Agricultural Markets, 27 September 2018
https://ec.europa.eu/agriculture/sites/agriculture/files/market-observatory/sugar/doc/market-situation_en.pdf
(7) EC, ‘EU Sugar Balance’, September 2018 update AGRI G 4 Committee for the Common Organisation of Agricultural Markets, 27 September 2018
https://ec.europa.eu/agriculture/sites/agriculture/files/market-observatory/sugar/doc/presentation_en.pdf
(8) See EC, ‘EU Agricultural outlook for the agricultural markets and income 2017-30’, Table Total sugar balance sheet in the EU, 2005-2030 (million tonnes white sugar equivalent), December 2017
https://ec.europa.eu/agriculture/sites/agriculture/files/markets-and-prices/medium-term-outlook/2017/2017-tables.pdf
(9) EC, ‘Short-term outlook for EU agricultural markets in 2018 and 2019’, Autumn 2018
https://ec.europa.eu/info/sites/info/files/food-farming-fisheries/farming/documents/short-term-outlook-autumn-2018_en.pdf