The end of EU beet sugar quotas could spark a growth in fairtrade certification in cane production
The sugar sector is set for a shake-up. In 2017, a 45 year old European Union system of quotas for the sweet stuff will come to an end, with potential significant implications for the sugar market. Like any change, there will be winners and losers.
The winners will include EU producers of sugar from sugar beet. EU demand for sugar currently exceeds domestic supply. According to the International Sugar Organisation, the EU consumed about 18% more sugar than it produced in 2013/14. But the end of quotas could turn the EU into a major exporter.
According to the European Association of Sugar Producers, growth in world demand for sugar over the last ten years has more or less kept track with the rising global population – so sugar producers can look forward to the extra two billion people expected to arrive by 2050.
The losers, however, could include sugar cane farmers from poor countries. While the EU quota is in place, these farmers provide – on preferential trade terms – the top-up to meet the EU sugar demand. They risk being edged out when quotas are lifted.
The Fairtrade Foundation, in a February 2015 report, noted that the ending of quotas was “not a levelling of the playing field” between EU and non-EU producers, because of subsidies “equivalent to around 1.8p for every 1kg of sugar” given to EU producers.
Sugar cane farmers in countries such as Belize and Jamaica face a tough transition, according to the Fairtrade Foundation, noting UK Department for International Development research that the end of the quota could drop 200,000 people in poor countries into poverty by 2020.
The situation might not be entirely black and white, however. Only about a fifth of world sugar production is traded internationally. Most is sold on local markets.
But because they have been doing the job of keeping the EU topped up with sugar, farmers in some poorer countries export all of their product and sell none in their home or neighbouring countries. Some sugar producing countries even import sugar to meet local demand.
Sugar cane producers could therefore make up for what they lose in sales to the EU by finding new markets – including those close to home. In addition, there will still be demand from EU markets for cane sugar, as opposed to refined sugar from sugar beet.
More certified sugar?
The end of EU quotas might also encourage cane sugar producers to focus more on sustainability, for example by meeting Fairtrade standards and earning the Fairtrade premium. Fairtrade-certified sugar still represents only a tiny fraction of the global market, but demand for a more sustainable product is growing.
In this context, consumer pressure on international brands to use sustainable sugar could have a positive impact for producers in poorer countries as they adjust to the absence of EU quotas. There is considerable scope for cane sugar producers to compete on sustainability. According to Bonsucro, only 4.1% of land under cane is currently certified sustainable.
However, for cane sugar producers to take advantage of new opportunities, investment is likely to be needed. The Fairtrade Foundation points out that the EU should not only take away sugar quotas. It could also give support and funding to those that may lose out from the change.
If you’ve any comments, do get in touch email@example.com.
How to manage and mitigate risk – and profit from sustainability
16th-17th June, Canning House, London, UK
This event is an independent conference that is designed for all stakeholders along the sugar value chain to discuss the commercial opportunities of implementing sustainability and ethical initiatives, and the practicalities of how to do it.
Here are some of the potential lessons you can take back to the office:
Nathalie Ritchie, Senior Manager Sustainability, Mondelez International
Raul Gomes, Global Category Buyer Sugars & Glucoses, Heineken
David Vermijs, Advisor, Shift Project
Anna Swaithes, Head of Livelihoods, Land and Food Security, SABMiller
Valladares-Molina, Ambassador to UK, Government of Guatemala
William Rook, Director, Czarnikow
Michelle Morton, Biofuels Sustainability Manager, Shell
Geraldine Kutas, Head of International Affairs, UNICA
Jenny Edwards, Project Manager – Sugar Beet Initative, Sustainable Agriculture Initiative
More than 50 large companies and 40 NGOs are signed up to attend, join us.