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New EU Governments Penalised Over Sugar Hoarding

  • November 16th, 2006
  • Posted by 7thmin

sweets-fats-chez-ld-029.jpgFive of the new member states of the European Union have been charged heavy penalties – totaling over EU 57- million (A$96.62-million; Decrates) – for holding onto stocks that would distort the managed European sugar market.

The governments of Cyprus, Estonia, Latvia, Malta and Slovakia undertook to get traders to dispose of excess stocks held before they joined the EU in May 2004.

It was, as the European Commission says, a provision to prevent a speculative build-up of stocks, to benefit from the EU sugar price being three times world market levels.

Some of the governments concerned said they had encountered difficulty off-loading their stocks on outside markets.

In the end a net total of just over 152 000 tonnes of white sugar was held in surplus after the expiry of deadlines set by the central regulator.

The EC has issued a statement saying that these surpluses had an impact on the market, measured by an accumulation of intervention stocks.

Because that impact was an imposition on the whole industry, the charges imposed on the five countries would be used to reduce levies paid by sugar beet and sugar producers in all EU countries, under common marketing arrangements.

The charge for retaining the excess stocks was EU499.5 per tonne, calculated on an export refund for white sugar, and then discounted by 25% as the total amount would be classed as a shared, “own resources” expense of the EU budget.

The charges imposed before discount: Cyprus EU 19 991 489 (A$ 33 547 187); Estonia EU 45 686 268 (A$76 641 912); Latvia EU 4 418 577 (A$7 412 472); Malta EU 1 224 774 (A$2 054 644); Slovakia EU 4 209 786 (A$7 062 210).

Marketing arrangements for sugar have been undergoing change, since 1.7.06, under a general readjustment of the Common Agricultural Policy (CAP) of the European Union; moving it away from production-linked support and export subsidies, towards direct “uncoupled” payments and development assistance to farming regions.

Outlines of the change:

The guaranteed price for white sugar will be cut by 36 % over 4 years; farmers will be compensated for, on average, 64.2 % of the price cut through a decoupled payment – which will be linked to environmental and land management standards and added to the Single Farm Payment; countries which give up more than half of their production quota will be entitled to pay an additional coupled payment of 30 % of the income loss for a temporary period of five years; a generous voluntary restructuring scheme will be established to provide incentives for less competitive producers to leave the sector; intervention buying of surplus production will be phased out after four years. Developing countries will continue to enjoy preferential access to the EU market at attractive prices. Those ACP (Africa Caribbean Pacific) countries which need it will be eligible for an assistance plan worth EU 40 million (AS67.1- million) for 2006, which will pave the way for further assistance.

Commission charges five Member States for failure to prevent build-up of surplus sugar stocks, IP/06/1551; European Commission , Brussels, 13.11.06
Reform of the Sugar Sector; European Commission – Agriculture, Brussels. (15.11.06)