1. Gábor Zsugyelik ISO Council Session Istanbul 23 May April 2006

2. ISO - 23 May 2006 2 The impact of the new EU Sugar Regime on the various stake holders  Reform objectives  Main instruments  Restructuring fund  Impact on stake holders –In the EU –Outside the EU

3. ISO - 23 May 2006 3 REFORM – objectives & timing  Improve competitiveness & market orientation  Create a sustainable market balance in consistency with the EU’s international commitments  Bring the sugar regime in line with the CAP reform process  Long-term policy framework (2014/2015)  Budget neutrality  Entry into force 1 July 2006; 4 years of transition  Marketing year 1 October / 30 September

4. ISO - 23 May 2006 4 REFORM – major instruments 1  Intervention price  reference price  Limited intervention until 2009/2010  Private storage  Price cut : 36% over 4 years  White sugar reference price : 404.4 €/t  Raw sugar reference price : 335.2 €/t  Minimum sugar beet price : 26.3 €/t  Compensation for growers (decoupled)

5. ISO - 23 May 2006 5 REFORM – major instruments 2  Quotas merged  Out-of-quota production : specific destinations  « Super Levy »  1.1 Mt additional domestic quota can be purchased  Isoglucose quota increased by 300 000 t  Compulsory quota cut at end of transition -if needed  Carry forward out-of-quota sugar  Withdrawal of quota sugar (annual measure)

6. ISO - 23 May 2006 6 Expected impact of the reform on the EU sugar balance 1.  Current situation: –Production: 19-20 Mt –Consumption: 16 Mt –Imports: 2.0 Mt –Exports: 5-6 Mt (2.5 Mt with refund) –Quota: 17.4 Mt

7. ISO - 23 May 2006 7 Expected impact of the reform on the EU sugar balance 2.  Situation after reform: –Production: 12-13 Mt –Consumption: 16 Mt –Imports: 3.5-4.0 Mt –Exports: 0-1.0 Mt

8. ISO - 23 May 2006 8 Why restructuring fund?  Avoid obligatory linear quota cut  Quota transfer between MS rejected  Accelerate restructuring of the sector  Financial incentives to leave  No EU money involved – 100% self-funding  Funded by levy paid on quota

9. ISO - 23 May 2006 9 REFORM – restructuring fund  Incentive to less competitive producers to leave sector  Provide resources to cope with consequences of factory closure  Aid : 730 €/t, 730 €/t, 625 €/t, 520 €/t  Levy : 126.4€/t, 173.8 €/t, 113.3 €/t  At least 10% of the aid reserved for growers  Commission report by 2008

10. ISO - 23 May 2006 10 Expected effects of R.Fund  3-5 mio t renounced  Lower EU output: only under quota  Concentration of sugar production in more competitive regions  (Reduction of inulin syrup production)

11. ISO - 23 May 2006 11 Effects on EU beet growers  If competitive: lower price + decoupled compensation  New outlet: beet growing for bioethanol (inspired by Brazil)  Switch to other crops

12. ISO - 23 May 2006 12 Effects on EU sugar producers  Concentration &/or reduction of capacity  « C » sugar capacity cut or look for EU market  In case of closure: –transfer into refiner –transfer into biofuel plant –total dismantling

13. ISO - 23 May 2006 13 Export possibilities  Quota sugar with/without refunds (Art 32)  Part of withdrawn sugar (Art 19)  Out-of-quota sugar - Art 12(d) Total EU exports shall not exceed the Community‘s WTO limits of 1.3 Mt and 513 M€ (minimal increase). Role of export refund expected to decline.

14. ISO - 23 May 2006 14 Effects on world market  Increasing (temporarily ?) WM prices –Higher self-sufficiency of importers  Higher market volatility (speculation)  Gap to be filled: –Destination refiners (BRA raw sugar) –White exports from BRA/India/other? –EU becomes net importer

15. ISO - 23 May 2006 15 Impact on ACP and LDC  EU committed to purchase 1.3 Mt ACP sugar  EU sugar market free from 2009 for LDC  System of guaranteed price kept  Significant amounts of compensation  Higher WM + lower EU prices might divert exports to other destinations  EU price now only 50-60% higher than WM

16. ISO - 23 May 2006 16 Conclusions  Significant drop of EU production + exports  EU to become net importer  Concentration on EU sugar industry  Higher WM prices and volatility  Maintained (ACP) + improved (LDC) market access to the EU

17. ISO - 23 May 2006 17 THANK YOU FOR YOUR ATTENTION! TEŞEKKÜR!