Opportunities for EU Sugar Post-2017 Lindsay Jolly Senior Economist
Structure of the Presentation - The possible impact of the EU quota abolition in 2017 - Price scenarios and changes to the EU sugar balance sheet - Prospects for additional EU exports - Conclusions
What Changed in EU Sugar Since 2006? EU-wide production cuts of 4 million tonnes, but quotas still in place Sugar exports refunds no longer allowed Duty-free imports from LDCs, ACPs and reduced duties for CXL (Brazil, Cuba) MFN import duties kept at EUR 419/tonne for white sugar and EUR 339/tonne for raw sugar 5
The 2017 Reform: The End of Production Quotas and the Threat of Isoglucose 14
The New Legal Provisions in a Nutshell Sugar and isoglucose production quotas abolished Minimum beet prices abolished But, import duties (EUR 419/tonne for white sugar and EUR 339/tonne for raw sugar) for non-preferential partners will remain 15
EU post 2017 Higher output is on the cards, but Stronger linkage to world prices will dictate supply/demand dynamics Beet sugar to face competition from iso-glucose EU likely to cut back on sugar imports LDC/ACP countries may be forced to expand shipments to local as well as non-eu markets
ISO Forecast: Price Scenarios and Impact on the World Trade 17
The EU28 Sugar Balance Post 2017: Scenario 1 Sugar Production Sugar Consumption Isoglucose Consumption Today (mln tonnes) Post 2017 (mln tonnes) 15.8 15.8 18.0 16.8 0.7 2.7 Imports 3.8 3.0 Exports 1.6 2.0 Trend 19
The EU28 Sugar Balance Post 2017: Scenario 2 Sugar Production Sugar Consumption Isoglucose Consumption Today (mln tonnes) Post 2017 (mln tonnes) 15.8 19.0 18.0 18.0 0.7 1.5 Imports 3.8 1.5 Exports 1.6 2.5 Trend 21
The EU28 Sugar Balance Post 2017: Average Scenario Sugar Production Sugar Consumption Isoglucose Consumption Today (mln tonnes) Post 2017 (mln tonnes) 15.8 17.4 18.0 17.4 0.7 2.1 Imports 3.8 2.3 Exports 1.6 2.3 Trend 22
The EU28 Sugar Balance Post 2017 Scenario 1 (low world prices) Scenario 2 (high world prices) Scenario 3 (base scenario) Sugar Production 15.8 19.0 17.4 Sugar Consumption Iso-glucose Consumption 16.8 18.0 17.4 2.7 1.5 2.1 Imports 3.0 1.5 2.3 Exports 2.0 2.5 2.3
The World s Largest Importer 2008-2011 (Million Tonnes Raw Value) Imports Exports Net Exports 7 5 3 1-2 2006 reforms and WTO ruling -4
USD/tonne The White Sugar Premium 180 160 140 120 100 80 60 40 20 0 2006 reforms and WTO ruling
The EU in the World Sugar Market (Million Tonnes Raw Value, 3-Year Average) India Sugar Consumption EU Sugar Imports EU China China Indonesia Brazil USA USA UAE 0 5 10 15 20 25 0 1 2 3 4 5 Brazil Sugar Production China Raw Sugar Imports India EU EU Indonesia China Malaysia Thailand USA 0 10 20 30 40 0 1 2 3
Prospects for EU exports It is likely that the EU will become a larger exporter in the absence of quotas, but EU producers will have to continue to drive costs down to remain competitive on a global scale Beets will have to be attractive against other rotating crops Beet sugar will have to be competitive versus cane sugar White sugar exports to clash with growing refining capacity at destination markets
Trends in World White and Raw Sugar Trade (Million Tonnes Raw Value) 37 White Sugar Raw Sugar 32 27 22 17 12
Growing refining capacity Since early 2000s Bangladesh (+3.8 mln tonnes) Indonesia (+3.2 mln tonnes) Algeria (+2.1 mln tonnes) Malaysia (+1.3 mln tonnes) Nigeria (+2.7 mln tonnes)
Growing refining capacity Next few years will see another 10.6 mln tonnes coming online Algeria (+1.4 mln tonnes) Iraq (+0.9 mln tonnes) Oman (+0.9 mln tonnes) India (+0.9 mln tonnes) Malaysia (+0.8 mln tonnes) Egypt (+0.6 mln tonnes) Bahrain (+0.6 mln tonnes) Sri Lanka (+0.6 mln tonnes)
Destination refineries may benefit from Large availability of VHP sugar Favourable logistics Competitive freight rates for bulk versus bagged sugar Access to protected markets Barriers to imports of whites vs raws Cheaper labour/energy costs
Can the EU compete? (3-Year Averages) 71 Sugar beet yields (t/ha) 20 Beet sugar production (in mln mtrv) 66 19 61 18 56 17 51 Pre-2006 Current 16 Pre-2006 Current 2 Beet area (mln ha) 53 Sugar beet price (USD/t) 1.5 1 48 0.5 43 0 Pre-2006 Current 38 Pre-2006 Current
World Sugar Consumption in 2020 50 45 2020 42.2 46.7 40 35 30 27.6 25 20 17.3 20.2 20.5 15 10 11.8 12.1 5 0
Conclusions After 2017 - EU domestic sweeteners (beet sugar and iso-glucose) to compete with preferential access sugar in a quota-free market - EU likely to become larger exporter with the abolition of quotas - Most price scenarios point to larger shipments immediately after 2017 - Level of exports will vary, reflecting more closely global market fundamentals - White sugar premium likely to fall immediately after 2017 - EU to face competition from growing refining capacity at destination markets - But this will depend on the raw sugar export availability - Drive to cut costs and boost efficiency key to EU s ability to compete on a global level - Growth in global sugar demand supportive of EU exports in the longer term