EU sugar set for leaner and fitter future, Fischer Boel

By Jess Halliday

- Last updated on GMT

Related tags: Fischer boel, European union

The ambitious EU sugar reforms is on track and progressing at good
speed, says Mariann Fisher Boel, confirming the positive outlook
expressed by firms presently planning next steps for their sugar
divisions.

Reform of the EU sugar sector was drawn up in 2005 and implemented in 2006 with the aim of improve competitiveness and market-orientation of the EU sugar sector and guarantee its long term future. Under the programme, financial incentives are offered to the less competitive producers to leave the market. Speaking at a seminar hosted by Danish firm Danisco yesterday, Fischer Boel said that 5.65m tonnes out of the target of 6m tonnes have now been given up, leaving just 350,000 tonnes short. "This is a resounding success that will leave the sector leaner and fitter for the future,"​ she said. The spin off or sell approach ​Danisco is currently preparing to spin off its sugar division as a separate company or to sell it by the end of 2008, in order to ensure the best future development opportunities for both areas of activity, while giving shareholders the choice on whether to back sugar or ingredients. Danisco had originally planned the move for 2010, to allow time for the fall-out from the reform process to settle. However in March it decided to bring it forward as the outlook for the industry started to look rosier. An update on the progress is expected on June 23, when Danisco releases its full year results. In the meantime, it announced today that it now expects to book a goodwill impairment charge in regard to its Sugar division of between DKK 0.5-1.0 billion. Spain's Ebro said this week that it is also considering a sale or spin off of its sugar operations. "This proposal to study an operation of this nature is considered convenient at a time when the viability and stability of the sugar business has been guaranteed for forthcoming years, after satisfactory completion of the Sugar CMO,"​ said Ebro in an announcement to shareholders. It is looking at completing the operations within 24 months.Future reviews ​ A Health Check of the Common Agricultural Policy (CAP) is presently underway. Although Fischer Boel said there are elements within the proposals, due for adoption by the European Commission on May 20, that will be relevant to beet growers. These include issues such as fighting and adapting to climate change, and water management. But the recent reforms for the sugar sector mean no specific proposals to be included in the health check. The next time the future of sugar policy will be up for debate will be the CAP reform in 2013. In the meantime, however, Fischer Boel said there is no call for complacency. "The sector must continue to improve. The European Union's agri-food sector as a whole must continue to raise its game in a globalised world - with the right policy support - and the sugar sector is no exception." No scapegoats ​ Despite the overall positive tone of the message, Fischer Boel did have some words of advice for some elements within the sugar sector. Firstly, while she said the restructuring has moved along "harmoniously"​ in most places, with growers and producers coming to an agreement between themselves to ensure fair compensation to growers going out of business, this has not been the case in some member states. "If there are countries where it has worked less well, I strongly suggest that the focus must now be on implementing the rest of the reform process more smoothly - not looking for scapegoats." ​ In response to those tempted to point the finger of blame at her for problems thus far, Fischer Boel said that it was always clear that producers and growers would have to organise quota reduction themselves. "Producers were always free to give precedence to certain growers - provided they did so on the basis of objective criteria. "The Commission said clearly that it would not interfere with such arrangements unless this was absolutely necessary, because in most cases the arrangements would be adequately covered by national and sectoral rules." Words of warning ​Fischer Boel also sent out a stiff warning over ongoing friction between the sugar industry and the chemical and fermenting industries. For a number of years the industries have failed to agree satisfactory supply contracts between themselves. "Year after year, I am my staff get telephone calls asking us to clear up the mess. This has got to stop,"​ she said. "If the two sides don't put there house in order very soon I will do it for them." ​ If a solution had to be imposed, she said, this would likely be a permanent tariff rate quota (TRQ) of 400,000 tonnes of sugar for the chemical and fermenting industries - about half of their needs. Such a TRQ would not, however, be in place in years when preventative withdrawal was on the cards, since it would have to be triggered on a yearly basis by market conditions.

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