Brazil and South Africa will muscle into traditional European Union sugar export markets in Africa, the Middle East and Asia if the EU Commission's reform proposals slashing sugar exports are implemented, analysts and traders said on Thursday.
EU Farm Commissioner Franz Fischler will propose a radical overhaul of the EU's longstanding, heavily subsidised sugar regime to reduce the bloc's dumping of sugar on world markets, according to a draft paper made available to Reuters in Brussels late on Wednesday.
EU sugar prices are three times world prices, but subsidies enable EU growers to export sugar to the detriment of low-cost producers in poor countries.
Under the proposed reform, which will need approval by the Commission and by EU member states, the Commission wants to cut EU sugar prices by around 40 percent and scrap its safety-net intervention system.
It also proposes merging national quotas and gradually reducing overall volumes from 17.4 million tonnes by 2.8 million tonnes.
Subsidised EU sugar exports would fall to 400,000 tonnes from the current 2.4 million under the proposals, which would take effect from July 2005 - one year before the present sugar regime is due to expire.
"Brazil would have an advantage in accessing traditional EU markets, but refined capacity in Brazil is still limited," said Roger Bradshaw, executive director, food and agribusiness, of Rabobank International in London.
"South Africa and port refineries in Dubai would also benefit," he added.
Sugar trade analysts said that Brazil, South Africa and Dubai white sugar refiners would be able to deliver the high-quality white sugar sought by the EU's traditional markets in North and West Africa, the Middle East, Hong Kong, Indonesia and Norway.
Another London analyst said Brazil, the world's biggest sugar producer, was a very efficient and aggressive marketer, while South African producers and Dubai refiners had an advantage over Asian origins of low freight costs to the main EU markets in North and West Africa and the Middle East.
"The South Africans are near. They have extra capacity. They are efficient producers," said Paris-based broker Jonathan Kingsman.
African, Caribbean and Pacific countries that benefit from guaranteed prices in their sugar exports to the EU could also suffer from the EU reform proposals as their guaranteed raw sugar prices could exceed white sugar prices when the reforms are implemented.
"The guaranteed prices enjoyed by countries such as Mauritius, Fiji, Guyana and Jamaica might have to be adjusted lower," one analyst said.