Europe's forthcoming sugar reform will be in vain unless prices fall sharply in the world's costliest sugar market, a major users group said on Monday. "The (European) Commission should use this occasion to finally get rid of the tacit price collusion between producers," Alain Beaumont, secretary-general of the Committee of Industrial Users of Sugar (CIUS), told Reuters in an interview. "That is what has driven up real market prices dramatically."
European industrial sugar production is dominated by just a handful of firms. In as many as eight countries, one company holds the entire national production quota, while in others the industry is highly concentrated with only a few large players.
Sugar buyers say this has made the cost of their raw material far higher than it should be. Over the years, several studies have been published on alleged "tacit collusion", although EU sugar producers have always denied this charge.
CIUS' members account for more than two-thirds of EU sugar consumption and buy some nine million tonnes of sugar a year.
Its members include Anglo-Dutch consumer goods giant Unilever, Coca Cola and confectionery maker Cadbury Schweppes, as well as many small and medium-sized businesses.
EU ministers are discussing plans envisaging a drop of around 40 percent in internal sugar prices when reform kicks in, expected to be in July 2006 when the current regime expires.
But price falls at the retail end of the supply chain for confectionery, for example, will depend on how much producers charge their buyers for quality sugar for industrial use.
As it stands, the reform will have a significant impact on beet growing and sugar production. Many, if not all, operations will feel a great deal of pain. And some will clearly not survive, leaving the field wide open for the biggest players.
One of the reform's most controversial ideas is to allow national production quotas to be transferred across borders, to enable less efficient producers faced with lower revenues to leave the sector by selling their allowance to a foreign rival.
"It's hard to avoid concentration," Beaumont said. "Transfer of production looks like the only option to build a sustainable sugar beet agriculture in Europe."
At present, quotas are allocated each year by country. Even after the reform, they would remain national, ensuring that big companies continue to dominate the market in some countries.
Analysts say producer concentration would probably increase with quota transfer since beet growing would end up confined to a narrow swathe of high-yielding land across the heart of the EU-25, while production in outermost areas would cease.
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