Sekretariat

Birgit Prietzsch
Institut für Marktanalyse

 

Bundesallee 63
38116 Braunschweig
Telefon: +49 531 596 5302
Fax: +49 531 596 5399
ma@thuenen.de


The European sugar market in transition. What happens when sugar quotas end in 2017?

Project

 (c) Nordzucker AG

Modelling the effects of abolishing the EU sugar quota system for the sugar markets in Germany, the EU and its member states as well as the world by the end of the sugar marketing year 2017/18

The European sugar sector faces a difficult time in the coming years. From 1 October 2017, sugar beet growers and the sugar industry will lose their long-term planning security regarding production quantities and prices. How will the market react to these changing conditions? And who will be the winners and losers of the resulting market reactions?

Background and Objective

In 2006, the EU sugar market regime underwent a major reform. The first since its establishment in 1968. After the end of this 4-year restructuring period in 2010, the sugar sector is again facing radical reform. As part of the CAP Reform 2014, the production quotas for sugar and isoglucose, which are fixed production quantities allocated to producers, will be abolished at the end of the sugar marketing year 2016/17. Simultaneously, the minimum price for sugar beets  is removed on 1. October 2017. After quotas are lifted, European beet and sugar prices are solely supported by border protection measures, i.e. import tariffs, and a reference threshold price.

Our project aims to assess the effects of quota abolition and the elimination of minimum prices on the EU sugar market. Currently, our work is focussing on the analysis of the competitive relationships between sugar and its substitute, isoglucose, on the European market. Moreover, the results of our project answers the research questions stated below.

Target Group

The results of our project can provide advice for representatives from business and politics.

Approach

At the beginning of the project, we analyse the current situation and likely future development of the European market for sugar and isoglucose. In addition, we try to develop a basic understanding of the relationships between these two markets as well as the function and effects of the European minimum price and quota policy.

Based on this analysis and in collaboration with our project partners (market experts), we develop several scenarios of quota abolition. Subsequently, we analyse these scenarios using a market model.

Data and Methods

To answer our research questions, we use a spatial price equilibrium model of the sugar sector (Nolte 2008). As a world model, it includes 118 countries at national level. Simulation results cover production and consumption position as well as bilateral trade flows with attached producer and consumer prices. In contrast to many other agricultural market models, national sugar policies (tariffs, tariff-rate-quotas, minimum prices, production quotas, consumer and producer subsidies) are explicitly modelled in great detail.

Within the project, we extend and refine the model according to the aims of the project. Model adjustments, in particular, concern the implementations of isoglucose as a second product on the European market and the modeling of the competitive relationship between sugar and isoglucose. Besides that, we update the database and the policy measures of the model.

As far as possible the model is based on official statistics (e.g. USDA, CEFS) and projections (e.g. OECD-FAO-Outlook, EU Commission). To improve and validate the model parameters, we use scientific publications and expert knowledge.

Our Research Questions

  • How will production and consumption in the EU develop after production quotas are abolished?
  • Will sugar production concentrate on a few competitive EU member states in the future?
  • How much sugar will be replaced by isoglucose?
  • How will sugar prices develop on the European and world market?
  • How will global trade flow of sugar change?
  • How competitive is the European Union in global sugar trade?
  • How will the changes in the EU sugar market affect the market of other countries?

Results

Results of the project show that the abolition of sugar and isoglucose quotas leads to:

  • an increase in sugar and isoglucose production in the most competitive EU Member States
  • a decline in sugar and isoglucose production in less competitive EU Member States
  • a crowding-out of sugar imports from third countries from the European market
  • a decline of the EU market price and slight increase in total sweetener consumption.
  • an increase in the market share of isoglucose

The market share of isoglucose and the extent of the increase in sugar and isoglucose production depend heavily on the future WMP development: The higher the world market price level:

  • the larger is the increase in EU sugar production
  • the larger the decline in EU sugar imports
  • the larger the reduction in sugar production of third countries
  • the lower is the market share of isoglucose

The results of the project are published in the series of the Landwirtschaftliche Rentenbank, available at:

www.rentenbank.de/dokumente/Die-Positionierung-Deutschlands-in-der-Internationalisierung-der-Agrar-und-Ernaehrungswirtschaft-2016.pdf

Haß_Banse (2016)_Das Ende der Zuckerquote 2017 (PDF, 3MB, german)

Furthermore, results of the project were presented at the GEWISOLA conference. The conference paper is available at:

ageconsearch.umn.edu/handle/245190

Thünen-Contact


Involved Thünen-Partners


Duration

8.2013 - 9.2015

Publications

hits: 3

  1. Haß M (2017) Der Zuckermarkt im Wandel: Was passiert nach dem EU-Quotenende? Schr Gesellsch Wirtsch Sozialwiss Landbaues 52:73-84
    pdf document (limited accessibility) 476 kb
  2. Haß M, Banse M (2016) Das Ende der Zuckerquote 2017: Wie wettbewerbsfähig ist die deutsche Zuckerwirtschaft? SchrR Rentenbank 32:77-110
  3. Haß M (2016) Der Zuckermarkt im Wandel: Was passiert nach dem EU-Quotenende? Agra Europe (Bonn) 57(39, Dokumentation):10-15