Phil Clarke blogs on sugar beet silliness in the EU.
Good weather has led to a bumper crop of beet and the EU as a whole is expecting to produce about 2.4 million tonnes. But that exceeds the 1.37m it’s allowed to export under a WTO ruling.
That was based on a complaint by Australia, Brazil and Thailand which had argued that the EU was “dumping” its surpluses on the world market.
But that was in the days when world prices were way below EU levels. The situation is very different today, with the global shortage of sugar leading to a doubling in prices in just 12 months.
The response suggested by CIBE is for the EU to increase the export ceiling for 2010, so that, instead of having to stockpile about 1m tonnes of surplus sugar, processors can sell it to the world market and help relieve the global shortage…
What could be more sensible? Global prices would come down a bit, the EU sugar industry would earn a bit and consumers the world over would save a bit.
But that’s not the way Brussels sees it. It maintains that “it is not possible to export out-of-quota sugar in excess of the WTO limit” and suggests the only option is to carry over any surplus into next season.
The EU could make a request to the WTO to lift the export ceiling.
It certainly seems unlikely that the likes of Australia, Brazil and Thailand would complain, since their consumers are feeling the impact of high sugar prices too.
The more likely outcome, however, is that the EU will do nothing. As a result, each member state will have to put its extra sugar into storage this winter, with all the cost that involves, and carry it forward to next season.
And that will mean further reductions in EU growers’ 2010/11 contract tonnages – even though prices are sky high and the world is crying out for sugar.
I presume the reason the WTO is involved is because the sugar beet production is subsidised.
The market might not be perfect and it means accepting the lows which inevitably occur but this illustrates how silly subsidies are when they prevent producers from benefitting from the highs.
It’s not good for consumers either. They’ll have been taxed to pay for the subsidies when demand was low and now there’s a sugar shortage they’ll be paying higher prices.