European sugar producers are angry that more and more cheap sugar from Central America is entering the European market. The quota to export sugar this way tax-free is increased every year. According to the umbrella organization CEFS, this is at odds with sugar prices, which may be high now, but have been persistently low over the past four years.
The European Union has had an association agreement with Central America since 2013. Under the trade pillar of this agreement, Costa Rica, Guatemala, Honduras, Nicaragua, Panama and El Salvador will be allowed to export 166.860 tons of sugar per year to the European Union duty-free. That quota can be increased by 5.000 tons annually.
As a result, the six Central American countries will benefit from a quota of 2021 tons in 200.880, Sugar Online reports. In 2021 alone, more than 165.000 tons of sugar from Central America has entered the European market so far. Much to the dissatisfaction of CEFS. The organization represents sugar producers in eighteen European countries, including Cosun Beet Company.
Quota increases and violation of agreements
The endless annual increases could damage the economic sustainability of the sector. The organization recently stated during a public consultation on the trade terms of the agreement. Together with CIBE (the European beet growers), it also notes that Guatemala, among others, repeatedly violates the provisions of the trade agreement. "The European Union must protect producers against partners who are unwilling to honor agreements. If conditions are not met, market access must be withdrawn. And certainly no concessions for market access should be granted."
Prices have been persistently low in recent years
CEFS is particularly concerned that more and more sugar can enter the European Union cheaply. And yet the European sugar market has suffered greatly over the past four years from persistently low prices. In addition, the corona crisis caused a decline in consumption and Brexit resulted in a reduced need for imports.
A similar discussion is also taking place in the United Kingdom. There, the government has extended the tariff-free quota for the import of 260.000 tons of raw cane sugar for three years. Trade organization NFU Sugar fears that this will further undermine the beet sugar sector in our own country. For example, the quota would have tripled Brazil's sugar exports to the United Kingdom.
Current sugar price fluctuates but is high
Moreover, the poor pricing on the sugar market is no longer noticeable today. Shortly after the outbreak of the corona crisis, sugar prices worldwide fell to a low, but the market slowly recovered over the course of last year. This increase continued last year. For example, the closing price on the Liffe in London in mid-November even reached the highest level in more than four years, namely €463,73 per tonne.
The strong price formation is mainly motivated by the expected shortage in sugar stocks. The international sugar organization expects a decline of 4% to 93 million tons this season. On the one hand, consumption is growing, on the other hand, production is declining in sugar exporting countries such as Brazil. The sugar market remains volatile, which is due to uncertainty surrounding the corona pandemic and the impact of the omikron variant. Last week the price in London fell slightly again, to just above €430 per tonne.