Oh Sugar, the EU is coming!

sugar Brent Hofacker/Adobe Stock

Spend Matters welcomes this guest post from Nick Peksa, opportunities director at Mintec.

One dark night in 1775, Paul Revere road his horse through the streets of Massachusetts shouting, “The British are coming!” While this may not be factually correct, I would like to be the first to shout, “Oh Sugar, the E.U. is coming!”

Sugar will enter the news again in the next couple of weeks as the E.U. finally removes its sugar restrictions. From Sept. 30, 2017, as part of the Common Agricultural Policy (CAP) reform, the E.U. will lift restrictions on production and exports of sugar from the E.U. After a decade of strict output quotas and export limits, what will this mean to the world?

The E.U. would like its community to be able to respond to market signals and produce export surpluses. How this translates into simpler terms: the European sugar groups have planted lots of sugar beet and they plan to export it.

The planted area for sugar beet in the E.U. is forecast to increase 20% year-over-year for the upcoming 2017/2018 crop. Production is set to rise significantly y-o-y in Belgium, France, Germany, the Netherlands and Poland — countries in the competitive “sugar belt” region. Sugar production in the E.U. is preliminary forecast at 20.1 million tons, subject to favorable weather conditions. There will be more sugar available, and this is one of the reasons why we have seen a steady drop in the price of world sugar (black line).

The good news for the U.S. is that sugar import quotas will prevent the E.U. flooding the American market. The bad news is that a couple of million extra tons of sugar in the world market will certainly shake things up globally and potentially damage U.S. exports of sugar alternatives like glucose and corn syrup.

The second positive piece of news for the sugar industry occurred in June this year when the U.S. struck a pre-NAFTA deal with Mexico to prevent the U.S. market being flooded by subsidized Mexican sugar.

So the US sugar industry will be happy, U.S. consumers will continue to a pay a premium over world price for their sugar and, most important, the E.U. citizens will not have to watch chests of their sugar being thrown overboard into Boston Harbor.

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Voices (2)

  1. Sargeant Saccharine:

    But…why? Why are EU farmers increasing production of a world glut crop.?

  2. Peter Smith:

    and Diabetes will continue to be a major problem for the health of the developed world … we will see a sugar tax in the next ten years in the UK I’m sure.

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