'Golden age for EU sugar producers over - Sugar industry in turmoil since EU scrapped quotas

Cristal Union, France’s second-largest sugar group, said on Monday the “golden age” for European Union sugar producers was over and that it expected significant changes in the EU sugar sector.

“Prices will recover at some point, but we don’t expect them to make it to the level we enjoyed under the quota system,” Cristal Union Chief Executive Alain Commissaire said in his opening remarks at the Dubai Sugar Conference.

The sugar industry has been in turmoil since the European Union scrapped production and export quotas in 2017, prompting many producers to boost output just as sugar prices collapsed under pressure from large world stocks.

Suedzucker, Europe’s largest sugar refiner, said last week it plans to close two German sugar production plants as part of a restructuring programme announced this week.

The plants are in Brottewitz and Warburg and together produce around 200,000 tonnes of sugar annually, a Suedzucker spokesman said.

The company said on Tuesday it plans to cut sugar production volumes by up to around 700,000t per year including factory closures because of the current slump in sugar prices.

Suedzucker produces about 5.9m tonnes of sugar a year.

However, both plants would continue to operate normally in the 2019 sugar production season, he added. The production season starts in the autumn.

Suedzucker said on Tuesday the restructuring plan aims to cut costs by about €100m ($115m) annually in the face of a “historically low” EU sugar price.

Raw sugar futures ended 2018 at their lowest in 10 years, pressured by heavy global oversupply.

Suedzucker on January 10 reported a third-quarter operating loss, hit by the global collapse in sugar prices.

The European Union liberalised its sugar market in September 2017, ending its system of guaranteed minimum prices and protected production quotas. This gave producers more freedom to expand and export, but a worst-case scenario emerged, with European producers exposed to collapsing world prices.

European producers are not planting extra beet area and some are turning to other crops offering better returns, Martin Todd, managing director at LMC International, recently told the International Sugar Organization’s annual seminar in London.

“Growers are finding beets are no longer the attractive crop it always was,” Todd told attendees.

The ISO has forecast the EU will produce 17.9 million tonnes of sugar in the 2018/19 season, down from 19.7m in the previous season. The inter-governmental body has not yet issued a forecast for 2019/20.

It comes as plans were recently unveiled to redevelop the sugar beet industry in Ireland.

The Proposal will cost €300m to revive the Irish sugar industry, and that the commitment of farmers to grow beet will also be required.

The meeting was organised by Beet Ireland in conjunction with the Irish Grain Growers' Group (IGGG) and was the second of a series of meetings to entice farmers to invest €1,000 each in a newly formed beet grower's co-op.

The initiative is based on getting 1,000 growers to produce 1.4m tonnes of beet per year, which equates to 50,000ac or an average of 50ac per grower.

Beet Ireland was established in 2011 to develop a new sugar and bioethanol industry in the southeast.

Following a feasibility study and the abolition of EU sugar quotas in 2017, the company purchased a site in Ballyburn, near Castledermot, Co Kildare.

Reuters