At the beginning of 2018, European sugar prices will most likely start to fall in order to become more in line with the global market. It then takes 1 or 2 years for the sector to get used to its new market environment (without quota). That is what the European Commission says.
In memo On the end of sugar production quotas in the EU, it says that between 2016 and 2026 sugar production will grow by about 6%. As a result, sugar imports fall from 3,5 to 1,8 million tons, but exports increase from 1,3 to 2,5 million tons. In addition, the stocks, which were at the lowest level ever in the summer of 2017, are being replenished. This will also absorb the increase in acreage (+20%).
After 2 years of shortages, international prices fell in the spring of 2017 due to the expected sugar surplus. For the coming period, European prices are expected to follow the trend of the world market. This means that prices will fall at the beginning of the new year.
Despite the increase in expected sugar production, the economic structure and drivers of the sugar processing sector can respond quickly and efficiently to developments in the market, the researchers believe. The hectares that are contracted annually can also be adjusted annually.
Responding to market signals
Backed by €5,4 billion from the EU, the sugar sector should be ready for quota abolition. The sector has prepared and should be able to react to market signals. The increase in production should be met by more exports, no more limits from the World Trade Organization and an increase in sugar stocks. However, it is inevitable that an increase in the acreage will bring the sugar price closer to the world market price.
Expansion in efficient regions
The Commission is convinced that after 1 or 2 years without quota, the sector is used to the new market environment. There is no escaping the fact that production will continue to expand in the most efficient regions and that some producers are contracting production. The Commission indicates that it monitors the aforementioned scenarios and will apply the appropriate safety measures where necessary.
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