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Evaluation of the Reform of the EU Sugar Regime and Restructuring - DO109

The 2006 reforms marked a major change in the sugar regime which had largely been left untouched for nearly 40 years. The regime had come under increasing pressure from forces both external (due to its impact on world markets) and internal (it was becoming increasingly anachronistic in relation to the extensive reforms of other sectors).

Ostensibly the objective of the 2006 reforms was to cut production by about 6m tonnes over a four year period (to around 13/14m tonnes, raw value). This level of change was expected to lead to a reduction in exports by about 4 to 4.5m tonnes (down to 1.4m tonnes) and a doubling of sugar imports to around 4.5m tonnes (Gudoshnikov, 2010). Although the voluntary renunciation scheme introduced as part of the reform, initially appeared to be struggling, the changes in 2007 made it more attractive and it is estimated that by 2010 around 5.2 million tonnes (white sugar) had been renouced. It is clear that the reforms have had a significant impact on beet production in the EU. Gudoshnikov (2010) reports that areas under beet decreased by about 700 thousand ha between 2005 and 2009. Five countries (Bulgaria, Ireland, Latvia, Portugal and Slovenia) stopped producing sugar beet while areas decreased by more than 50% in seven countries (Finland, Greece, Italy, Lithuania, Portugal, Czech Republic and Slovakia). The number of beet growers has sharply declined (but partly compensated for by higher sugar yields). Similar to the beet growing sector, beet processors have also undergone considerable restructuring. It is estimated that the number of sugar factories reduced from 188 in 2005 to 106 in 2009, including the closure of the Allscott and York factories in England.

Whilst sugar imports have increased into the EU, the sugar regime reform has not changed the concept of restricted market access for imported sugar. In addition, it is clear that restructuring has also occurred in those countries supplying sugar to the EU as a result of the reform of the EU policy - mainly in light of the reduced price in the EU.

On the surface it may seem that the reforms have been largely sucessful in reducing the quantity of sugar produced under quota in the EU. However, it is important to evaluate the impact of these changes on the profitiability, efficiency and competitiveness of the EU sugar industry (both in terms of sugar beet production and sugar processing) and also its impacts on the EU's trading partners (those with/without preferential agreements). Key questions include: the extent to which the reforms have improved the efficiency and competitiveness of EU sugar production (for example by removing high cost inefficent production); the impact the reforms have had on those countries that have/do not have preferential agreements with the EU and; the cost-effectiveness of the reforms (e.g. is there evidence of over compensation?).

In order to address the key research questions a range of approaches will be used including a detailed literature review, use of available datasets (FBS, FADN), farming networks (agribenchmark), secondary data analysis and economic modelling. Specific steps of the research will be:

1. Literature review
2. UK sugar beet farming analysis
3. Preparation of GTAP model for the simulation
4. Simulation of the impact of the sugar reform
5. EU sugar beet farming analysis
6. Expert panel workshop
The main objective of the research is to evaluate the economic impacts of the EU sugar regime reform package agreed by the Agriculture Council on 24 November 2005 and formally adopted on 20 February 2006 and the 2007 changes to the sugar restructuring scheme.

The proposed research will be expected to consider the economic impact of the reform in terms:
a. UK, EU and global sugar prices
b. Income of UK and EU sugar growers
c. Structure of the sugar industry in the UK and EU
d. Profitability of EU processors and competition within the EU
e. International competitiveness of UK and EU growers and processors
f. Prices and profitability of producers in other countries, especially LDCs and those in the ACP grouping
g. EU trade
h. Net economic benefit to the EU
i. Implications of the reform for accession member states
Project Documents
• FRP - Final Report : Evaluation of the Reform of the EU Sugar Regime and Restructuring   (1832k)
Time-Scale and Cost
From: 2010

To: 2011

Cost: £68,806
Contractor / Funded Organisations
University - Scottish Agricultural College
CAP Reform              
Common Agricultural Policy (CAP)              
European Union (EU)              
Future EU Policy              
International Trade              
Policy Analysis/Evaluation              
Policy Development