Rabobank says end of coupled support could impact 20% of European sugar production

Published: 10/03/2018, 7:05:56 AM

The end of voluntary coupled support payments in the European Union could compromise up to 4 million metric tonnes of sugar production capacity across the continent, reports Anna Flávia Rochas for Sugaronline.

The future of this policy, which allows member state governments to subsidise farming and other sectors undergoing difficulties but considered to be important to the local economies, is part of the discussions underway related to the Common Agriculture Policy post-2020.

"This might be another game changer for the sugar industry," said Ruud Schers, analyst for Rabobank's RaboResearch Food & Agribusiness told delegates at the S&P Global Platts 5th Annual Kingsman Miami Sugar Conference last week.

Beet farmers representing 20% of EU's total sugar production-about 4 million tonnes-are currently favoured by this incentive, according to his estimates. They won't all necessarily disappear if the support is terminated since some could still be competitive, but Schers foresees a possible drop in Italy and in other countries in central eastern Europe.

"Anything between 1 and 2 million tonnes is maybe feasible," he said about the production which could phase-out, speaking to Sugaronline on the sidelines of the event.

A cut in EU sugar production could also mean a drop in the continent's sugar export to other international markets, according to Schers.

"I think this is something that we should take seriously. It is still under discussion, but if they change the subsidies system it is more than the farmers that are affected, but the whole market related to it," he said.

Countries supporting local sugar beet production are Czech Republic, Greece, Spain, Finland, Hungary, Lithuania, Croatia, Italy, Poland, Romania and Slovakia.

Some Western European countries are currently pushing for the end of the coupled support payments, arguing that it doesn't make sense to keep sustaining less competitive players after the EU got rid of sugar quotas in an effort to liberalise the market.

Poland, for example, which receives about EUR80 million (US$92.2 million) per year in coupled support, produced 2.4 million tonnes of sugar in 2017/18, 500,000 tonnes of which was exported to countries outside the European Union.

Schers said that Poland is an exception, since other countries that receive the coupled support haven't increased exports and don't export any significant volumes.

"Whether or not Poland is a competitive enough producer is difficult to say, but any drop or disappearance of VCS would most probably lead to a drop in margins for the producers," he said.

"The increase in yields and efficiency during the past years surely have led to an increase in competitiveness, especially also bearing in mind the investments that took place in preparation of the post-quota era."