EU 'confident' sugar sector prepared for end of quota

On the same day, commission sources told journalists that the end of the sugar quotas "cannot be compared" to the end of milk quotas in 2015.

Two years ago, ahead of and after the end of the milk quota, dairy farmers increased production, which led to a drop in milk prices.

Farmers protested several times following the official cut-off date, some of them asking for new government interventions. In September 2015, the commission offered half a billion euros to support them.

"I cannot look into a crystal ball and know how different market participations react", said a commission source, adding, however, that several structural factors "give rise to the belief that it is a different situation" with the end of the sugar quota system.

In the sugar sector, it is the producers - and not the beet farmers - who decide the quantity of sugar produced.

"In the milk [sector], it's the farmers who have taken individual business decisions to invest," the source said.

Sugar beet is often one of several arable crops that farmers produce, and between which they rotate to keep the soil fertile.

"There is certainly the possibility for farmers to adjust. … You can have a certain variation in your crop rotation," said the source.

"Production decisions are taken on an annual basis, whereas investing in milk and herds have much longer cycles," she noted, adding that milk in Europe is often produced in regions where there is little to no alternative.

Exports

Additionally, the worldwide sugar market is very competitive.

"European sugar producers are very well aware of the fierce competition they have outside," the contact said.

Until Sunday (1 October), EU producers are not allowed to export more than 1.3 million tonnes of sugar. This export limit was tied to the sugar quotas, and will also be lifted.

But the commission does not expect Europe's sugar industry to be able to compete with, for example, Brazil on the American market.

Instead, the Middle East and North Africa were mentioned at the briefing, and in particular Israel, as new potential export markets.

"They will compete in zones where the transport costs give the European industry some advantage," a second source said.

Potential pressure

Last March, the European Association of Sugar Producers and the European Federation of Food, Agriculture and Tourism Trade Unions - representing respectively the employer and employee side of the sector - adopted a joint statement on the end of the sugar quota system.

"The end of quotas presents substantial opportunities for EU beet sugar manufacturers, in particular the possibility to produce more sugar for food use and to export without limits," they said.

However, they warned that the end of the quotas could also put the sector "under pressure".

"Less competitive EU beet sugar manufacturers may struggle to survive in a harsher market environment," the statement noted.

Volatility

However, the commission source said on Friday that the sugar industry should "be prepared" for changing prices, and is doing so.

"The sugar market at world level is very volatile, one of the most volatile markets. Some of this volatility will come more into our market," she said.

The sugar production quotas have been part of the EU's agricultural policy since 1968.