Category: Sugar

The reduction of EU sugar prices and scheduled abolition of EU sugar production quotas have and will continue to transform the market conditions faced by ACP sugar exporters to the EU. Under the impact of EU sugar sector reforms prices on sugar markets served by ACP sugar exporters are likely to be increasingly volatile. In addition the consolidation and internationalisation of European sugar companies which EU reforms have given rise to are having important effects on patterns of ACP-EU sugar trade. Intensified competition on EU sugar markets is bringing into question the financial sustainability of the full-time raw cane sugar refiners who traditionally refined ACP raw sugar exports. The final stages of EU sugar sector reforms will carry particularly profound consequences for smallholder sugar cane farmers in ACP countries. Close attention will ned to be paid to strengthen the regulatory framework for the functioning of ACP-EU sugar supply chains. This will need to include the development of new revenue sharing formulas which allow independent sugar cane growers to gain a share of revenues from the new products increasingly manufactured from sugar cane.
The challenges faced in ACP-EU sugar sector relations will be further complicated by the impending departure of the UK from the EU.
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Brexit and Trade Displacement: Areas of Concern for ACP Countries

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Summary

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”

Trend Towards Reduced Sugar Content for Processed Food and Drink Products Taking Hold

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Summary

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.

Source
(1) Foodnavigator.com, ‘Healthiest products should be tariff free post-Brexit, says Sugarwise’, 25 August
http://www.foodnavigator.com/Policy/Healthiest-products-should-be-tariff-free-post-Brexit-says-Sugarwise
(2) Foodnavigator.com, ‘FDF-BRC-back-coordinated-approach-to-sugar-reduction’, 21Augusts 2017
http://www.foodnavigator.com/Ingredients/Carbohydrates-and-fibres-sugar-starches/FDF-BRC-back-coordinated-approach-to-sugar-reduction

Key words:    Sugar, Food and Drink Federation, British Retail Consortium, Sugarwise
Area for Posting: Sugar, Brexit

Tereos Expanding its Presence the East African Sugar Sector

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Summary

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”

Proposed EC Regulatory Initiative on UTPs Needs to be Extended to ACP-EU Supply Chains

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Summary

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”

Hard Brexit Could Severely Disrupt EU27-UK Agro-Food Sector Trade

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Summary

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”

Agro-Food Sector Effects of the Application of MFN Duties on EU27-UK Trade: An Area of Potential ACP Concern and Opportunity

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Summary

If MFN duties are introduced on EU27-UK trade as a result of a failure to reach a new trade agreement this could disrupt existing ACP supply chains. However such a development could also present opportunities for ACP countries to expand their direct exports of value added products to the UK in sectors such as the cocoa sector.  Marketing adjustment and investment support however could be needed to enable ACP exporters to respond positively to the challenges which lie ahead. Read more “Agro-Food Sector Effects of the Application of MFN Duties on EU27-UK Trade: An Area of Potential ACP Concern and Opportunity”

UK Area Under Sugar Beet Set to Surge

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Summary

A major expansion of the area under sugar beet in the UK (+ 1/3) is planned in 2017/18, with potentially a further major expansion by 2020 if current investment plans of Al Khaleej International to re-establish sugar beet processing in Yorkshire are approved. While a failure to conclude a UK-EU27 trade agreement could open up new export opportunities for ACP sugar suppliers to the UK, this would be strongly influenced by future UK sugar sector tariff policy. If tariffs remain unchanged the source of ACP sugar imported into the UK could shift from the Caribbean and Pacific suppliers to lower cost Southern African suppliers. UK government policy statements suggest Southern African LDC sugar exporters would enjoy the most secure commitment to continued duty free-quota free access for sugar exports to the UK market post Brexit, providing them with an inside track in pending negotiations over supply agreements for 2019. Read more “UK Area Under Sugar Beet Set to Surge”

French producers lead way in expanding EU sugar beet production despite low global sugar prices

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Summary

Both Tereos and Cristal Union have announced plans to expand sugar beet plantings by 25% in the 2017/18 season, as EU sugar companies’ battle for market position in a post-production quota EU market. The corresponding contraction of sugar production in areas less favoured for sugar production is however undermined by continued deployment of coupled sugar specific sugar to producers in 10 EU member states accounting for 35% of the total area under sugar beet in the EU in 2016/17. These payments range from €67 to €518 per ha. The trade effects of these policy driven distortions will be most severely felt by traditionally preferred ACP sugar exporters, as EU sugar imports contract and exports expand. ACP sugar exporters will need to radically rethink their market positioning strategies if they are to profitably export to the EU. Read more “French producers lead way in expanding EU sugar beet production despite low global sugar prices”

DIT SACU Discussions to Extend Current Access to the UK Market More than a Technical Exercise

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Summary
During the July 2017 visit of UK Secretary of State Lord Price to Southern Africa a commitment was made to replicating current market access arrangements post-Brexit. However it remains unclear how this to be achieved. The transitional extension of existing reciprocal preferences could not only face serious opposition from WTO members but would be far from a simple ‘technical exercise’. New rules of origin which took account of the UK’s departure from the EU agreement would be essential, in order to establish which products qualified for ‘originating status as UK products. The alternative would amount to an absence of rules or origin. Either would be a substantive modification of the existing terms of the UK’s export trade. The future of Tariff rate Quota (TRQ) arrangements under the EU agreement would also need to be resolved in the immediate post Brexit period. Looking to the longer term, there are a multiplicity of non-tariff issues related to post-Brexit UK trade and agricultural policies which give rise to profound uncertainties over the future value of any post Brexit preferential trade arrangement with the UK for certain SACU members. Many of these uncertainties will need to be addressed before the future value of a bilateral trade deal with the UK can be fully assessed. Read more “DIT SACU Discussions to Extend Current Access to the UK Market More than a Technical Exercise”

Difficult context for Guyanese sugar sector restructuring faced

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Summary
The government of Guyana has announced plans to restructure and downsize the sugar sector, with a focus on the production of direct consumption and specialty sugars for national regional and preferential markets. Revenue diversification through electricity co-generation will also be promoted. Guyana will need to strengthen its marketing infrastructure if it is to be able to compete on regional markets, given the wider trade consequences of EU sugar sector reforms. While EU markets will no longer be a focus, opportunities could exist for the development of new partnerships for the marketing of specialty sugars in Europe.  Read more “Difficult context for Guyanese sugar sector restructuring faced”