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USDA GAIN: Oilseeds, Cotton, Sugar, Grain and Feed

09 May 2012

USDA GAIN: EU-27 Sugar Annual 2012USDA GAIN: EU-27 Sugar Annual 2012

For MY 2012/13, EU sugar production is forecast at 15.5 million MT on a raw sugar basis, dropping 10 percent back to 2010/11 levels. Sugar imports in MY 2012/13 are forecast to drop slightly to 3.3 million MT, while exports are forecast at 1.5 M MT, falling 40 percent from this year but remaining above 2010/11 levels. EU sugar production for MY 2011/12 is estimated to be 17.2 million MT, around 12 percent more than in MY 2010/11. This record crop comes just two years after the 2009 record and resulted in the longest EU beet processing campaign in history. The EU authorized the release of 650,000 MT of out-of-quota production on the EU food market. Exports are expected to reach 2.5 million MT, while imports are estimated to be 3.4 million MT due to additional measures taken by the EU.
USDA GAIN Report - Oilseeds, Cotton, Sugar, Grain and Feed


Sugar, Centrifugal


For MY 2012/13, EU sugar production is forecast at 15.5 million MT, based on average per hectare sugar yields which are about 10 percent below the 2011 record yield and on par with MY 2010/11 levels. EU sugar processors, who contract with farmers for their beet supply, encouraged farmers to maintain acreages. Early indications of beet planting intentions suggest that total EU beet acreage may increase further as Italian beet planting is expected to recover following a drop in 2011 due to a wet spring and lower beet contract prices.

EU sugar production for MY 2011/12 is estimated at 17.2 million MT in raw sugar equivalent (RSE). EU farmers increased beet planting for MY 2011/12 by 3-5 percent in several Member States (MS) in response to EU sugar processor requests and in anticipation that the EU would continue allowing sugar produced out-of-quota to be used in food processing, instead of only for industrial use as is normally the case. Beet growing conditions, especially during the autumn, allowed for all-time record yields in many MS. In order to process this record beet crop, many sugar processors operated one of the longest beet processing campaigns ever, in many cases 120-130 days into late January or February 2012. Frost, like what destroyed several million MT of sugar beet in the United Kingdom the previous year, did not occur until after the processing campaign.

MY 2010/2011 sugar production in the PS&D was increased from 14.8 million MT to 15.3 million MT due to the Commission’s decision in 2011 to allow the sale of 500,000 MT of out-of-quota production into the food market.

Additional sugar production for other uses

The EU sugar market is heavily regulated. EU domestic sugar production for food purposes is limited by a production quota set for each MS. The 2007 Sugar Reform limited total EU production quotas to 13.3 million MT white sugar equivalent or 14.5 million MT RSE. Additional production is considered “out-of-quota.” EU sugar processors have four options to market sugar produced out-of-quota:

  1. Exports: pending availability of EU export licenses, which are limited to the EU WTO sugar export ceiling of 1.35 million MT (of refined sugar).
  2. Release on the EU domestic market: this option carries a levy of €500 per MT, unless the EU decides to waive all or part of the levy through exceptional sugar market management measures.
  3. Disposal on the EU market for industrial purposes: for example, for fermentation by the biochemical industry or for bio-ethanol production.
  4. Carry-over into the following production year: counts towards the quota production for that year.

Total production by MS during MY 2011/12 that fell within the assigned quota amounts totaled 13.1 million MT of white sugar equivalent or 14.2 million MT RSE. Those MS that exceeded their quota produced a total of 6.3 million MT of out-of-quota sugar. The large out-of-quota supply prompted the EU to take exceptional measures by releasing 400,000 MT of out-of-quota production for food in December 2011 and another 250,000 MT beginning in May.

The MY 2011/12 measures were mandated by the same regulation [1] that mandated measures during MY 2010/11, when limited supplies prompted the EU to release 500,000 MT of out-of-quota production on the EU food market without the €500/MT levy. Supplies were limited because of lower than anticipated imports for the current and previous marketing year.

The table below shows the total EU beet sugar production for MY11/12 as 20.5 MMT. This figure includes 17.2 MMT for the EU regulated sugar market production (same as in the PS&D table) and 3.3 MMT of unregulated over quota production for industrial uses. The 17.2 MMT includes around 2.3 MMT of out of quota production for exports and approximately 700,000 out of quota production for the food market. The same calculations were made for the other marketing years.


EU domestic sugar consumption for food increased to 17.8 million MT, up from 17.5 million MT in MY2009/2010. More sugar is used in food processing, which accounts for over 70 percent of EU consumption. In the past, EU food processors could only compete in export markets with the support of export subsidies that compensated for the higher sugar prices processors paid for domestic sugar. Processors also had the option of using an inward processing customs regime, where processors could import sugar duty free to manufacture products for export. However, due to changes to the EU sugar program in 2007, the EU eliminated sugar export subsidies. The increase in sugar prices on the world market in late 2010 greatly diminished the price gap between EU and international market sugar prices. As a result, EU processed products are more competitive on the international market when processors use domestic sugar and the incentive for using sugar imported under the inward processing program has diminished. This has led to an increase in EU domestic sugar consumption for producing EU processed food for export, as well as decreasing use of the EU inward processing scheme.

During MY 2010/11, contracts with processors were concluded when prices were lower, so EU food processors benefited from the relatively lower price. During MY 2011/12, the situation changed. Long-term supply contracts for the new marketing year were at substantially higher prices than the year before and were closer to international market prices. Some sugar users in the EU food industry reportedly refused to conclude supply contracts at a higher price, since they speculate that increased sugar supplies will eventually drive sugar prices down.

Out-of-quota sugar disposal

Current high world market prices and the release of out-of-quota production for food use make sales to industrial users the least appealing for processors. In addition, sugar for industrial uses competes directly with corn and other cereals. Because of the drop in grain prices in MY 2011/12, sugar is a less competitive option in these outlets. As a result, little or no growth in the use of sugar for industrial uses is anticipated in MY 2011/12. This is reflected in the absence of any new investments for bio-ethanol production from sugar beet in 2011 and 2012. Processors typically consider carry-over to the following production year the option of last resort because of considerable storage costs and because the carry-over counts toward the quota in the next production year. Despite the large MY 2011/12 out-of-quota production, processors appear to be speculating that the EU may approve further exceptional measures later in the year, rather than choosing to sell production to industrial users. This appears to be happening despite the risk that they may be required to carry over supply if it does not sell before the end of the marketing year.



EU MY 2012/13 sugar imports are forecast at 3.3 million MT, based on continued import trends from traditional suppliers and EU TRQs. This is few percent less than in MY 2011/12 as it does not assume further EU exceptional measures.

High world market prices for sugar continue to have a negative effect on EU sugar imports in MY 2011/12, even after the EU approved a set of exceptional measures to facilitate sugar imports. Increasing world sugar demand and resulting high prices made the EU a less attractive market so exports to the EU from traditional suppliers decreased. These suppliers are mostly developing ACP [1] countries that concluded European Partnership Agreements [2] (EPA) after the expiration of the Cotonou Agreement. Other least-developed countries that gained duty-free access to the EU market under the Everything But Arms Agreement [3] (EBA) are not shipping adequate sugar amounts to the EU either, continuing a trend that began in MY 2009/10 when the Cotonou agreement ended and expected increases from the EBA did not materialize.

At the beginning of MY2011/12, sugar imports from ACP and EBA countries strengthened. If the trend continues, imports from ACP and EBA countries could reach 2 million MT, compared to 1.9 million MT the previous year. Imports under the EU’s so-called CXL [4] and the Balkan TRQ are also estimated to reach 1.1 million MT RSE. At the beginning of MY 2011/12, the EU launched four import tenders totaling 191,000 MT of raw sugar imports at reduced duties of €252.5 to €270.16, compared to the full duty of €339/MT. While the EU suspended two more tenders planned for February 2012, it still has three tenders planned in May and early June. As a result, total EU MY 2011/12 sugar imports are estimated at 3.4 million MT.

In MY 2010/11, the EU’s exceptional measures eventually resulted in sugar imports totaling 3.75 million MT, of which more than 1.2 million MT were refined sugar imports, doubling EU refined sugar imports compared to previous years.

EU sugar market prices

Reference Price and Market Price for White Sugar on the EU Market

At the beginning of MY 2011/12, sugar prices on the EU market increased 30 percent compared to prices at the beginning of MY 2010/11. This increase lagged increases seen on the world sugar market because the majority of EU sugar users make long term supply contracts with sugar processors. The long-term contracts were practical when domestic sugar prices were fixed by the EU. The 2007 Sugar reform replaced EU guaranteed sugar prices with a reference price, which decreased to €404/MT in 2009. EU market prices did not decrease in line with the drop in the reference price as anticipated because of the increase in prices seen on the world market. For MY 2011/12, EU sugar processors were expecting the market price to decrease following the decrease in the reference price and negotiated the prices for their new supply contracts accordingly. Thus, processors were unable to take advantage of the price increase seen on the world market, benefitting the EU sugar users. For MY 2011/12, sugar processors offered new annual supply contracts at higher sales price, triggering the acceleration in the recorded EU sugar price for food purposes. For MY 2012/13, it is hard to make price forecasts as it is unclear how world prices will evolve.

White Sugar PRICES on the EU Market for Industrial Purposes

EU sugar prices for industrial purposes are lower than sugar prices for the domestic food market. This sugar is valued lower because of the limited disposal options that exist for out-of-quota sugar due to the EU sugar regime and EU WTO limitations for sugar exports. The high volume of EU out-of-quota sugar production in MY 2011/12 forces EU sugar prices down. As a result, the large price gap with world sugar prices is making such imports economically unviable and few sugar imports for industrial purposes occur, even by industrial sugar users who traditionally import raw sugar into the quota for industrial use. Depending on the level of world sugar prices, this may be the case again in MY 2012/13.


The MY 2012/13 EU sugar export forecast is 1.5 million MT and assumes that the EU will remain within its WTO export limits. This is only 60 percent of MY 2011/12 exports, but still 25 percent higher than in MY 2010/11.

Due to the MY 2011/12 record crop, the EU opened export quotas for out-of-quota sugar production up to the EU WTO export limit of 1.35 million MT for CY 2012. In an earlier decision, the EU made the remaining 700,000 MT of sugar exports under the CY 2011 WTO ceiling available for sugar exports in the first quarter of MY 2011/12. As a result, total EU sugar exports in MY 2011/12 are estimated at 2.5 million MT RSE, almost all of which are white sugar.

During MY 2010/11, the EU exported 1.1 million MT of white sugar, largely to traditional customers in the Middle East.


During MY 2012/13, sugar ending stocks are forecast to decrease about 10 percent again to pipeline needs. EU sugar imports from EPA and EBA countries are not expected to significantly increase during this time.

MY 2011/12 ending stocks are estimated to be 2.5 million MT because the record production is estimated helping replenishing pipeline stocks. This is more than 25 percent over MY 2010/11 ending stocks, even as the EU’s exceptional measures releasing 500,000 MT of out-of-quota sugar for food allowed some easing on the tight EU sugar stocks situation.

May 2012

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