EU sugar farmers eye deregulation but wary of milk sector’s fate – eDairyNews
Countries New Zealand Belgium Europe |27 enero, 2017

Dairy industry | EU sugar farmers eye deregulation but wary of milk sector’s fate

Can the region’s industry learn from the dairy market’s tumultuous experience?

European dairy farmers descended on the EU headquarters in Brussels this week, spraying the summit centre with milk powder in protest at the low prices that have driven many producers to the brink of bankruptcy.

“Milk producers all over Europe are still in the throes of the crisis,” says Sieta van Keimpema, dairy farmer and vice-president of the European Milk Board, the lobby group representing the region’s producers.

With the EU set to deregulate its sugar market in an echo of changes made to the dairy sector, some sugar growers and agricultural experts are asking whether it could be Europe’s sugar beet growers spraying the Brussels buildings with white sweetener in a few years.

Deregulation of Europe’s milk market — lifting restrictions on production and exports as part of its agricultural reforms — has hardly gone smoothly. Encouraged by the EU’s move to liberalise the dairy market in 2015, when output quotas were lifted, many producers boosted output. Coming just as Russia closed its borders to food imports from the West, and China was grappling with high inventories, prices that more than halved in the two years to the end of 2015. This led to one of the most sustained periods of lower prices since world prices crashed in 2007-2008.

“[Liberalisation] has not worked at all,” argues Ms van Keimpema. The dairy processors had encouraged milk producers to deliver more because “the demand in, for example, Asia and Africa would boom so much that there would not be enough milk to meet the demand”.

“Milk producers all over Europe are still in the throes of the crisis,” says Sieta van Keimpema, dairy farmer and vice-president of the European Milk Board, the lobby group representing the region’s producers.

With the EU set to deregulate its sugar market in an echo of changes made to the dairy sector, some sugar growers and agricultural experts are asking whether it could be Europe’s sugar beet growers spraying the Brussels buildings with white sweetener in a few years.

Deregulation of Europe’s milk market — lifting restrictions on production and exports as part of its agricultural reforms — has hardly gone smoothly. Encouraged by the EU’s move to liberalise the dairy market in 2015, when output quotas were lifted, many producers boosted output. Coming just as Russia closed its borders to food imports from the West, and China was grappling with high inventories, prices that more than halved in the two years to the end of 2015. This led to one of the most sustained periods of lower prices since world prices crashed in 2007-2008.

“[Liberalisation] has not worked at all,” argues Ms van Keimpema. The dairy processors had encouraged milk producers to deliver more because “the demand in, for example, Asia and Africa would boom so much that there would not be enough milk to meet the demand”.

Although the milk price had rebounded from last year’s lows, it is still lower than the cost of production, says Ms van Keimpema.

Europe is one of the world’s leading milk producers, accounting for about a quarter of total output, and a push to increase supply and sell it on the export market has had a big impact on the international market, say analysts.

“The [EU milk] market is trying to find its balance again,” explains Kevin Bellamy, analyst at Rabobank, the Dutch bank which is a key lender to the agricultural sector. With Europe back in the international market, “the level of volatility is much higher than we’ve historically seen”, he adds.

Although the region’s sugar producers are not as big as their milk counterparts, they are still substantial players, producing about 10 per cent of the world’s supply, trailing only Brazil and India.

With the region’s large sugar companies, including Tereos, Cristal Union and Suedzucker, offering farmers higher prices for their sugar, production in the coming 2017-18 season could increase 10 to 20 per cent from the previous 16.6m tonnes, analysts estimate.

The EU, previously a net sugar importer of about 2m tonnes, is poised to become a net sugar exporter of about 2m tonnes, says Robin Shaw, an analyst at commodity brokers Marex Spectron.

Luckily for Europe’s sugar farmers, deregulation comes at a time when the world sugar market has been extremely tight, with two consecutive years of shortages. International sugar prices jumped more than a third last year, with the New York benchmark trading at about 20.50 cents a pound. “The market needs the extra sugar from Europe,” says Mr Shaw.

Growers in France and the UK are likely to lead the push for more acreage to be planted. France, the EU’s largest producer, is expected to increase its planted area by 15 per cent, raising production by 17 per cent, and the UK will increase its acreage by a third with output growing almost 40 per cent, according to estimates by Kingsman, the sugar analysts now part of S&P Global Platts.

However, even a tight market can quickly become oversupplied. Claudiu Covrig at Kingsman says that production in the large sugar exporters, which had been hit by dry weather over the past few years, could rebound. “Brazil and Thailand look better and India also looks like it’s going to recover,” he says.

“How much Europe can export will depend on what the international market looks like. The current levels look good for Europe, but if it’s below 18 cents per pound then Europe is not competitive.”

Unlike dairy farmers, European sugar growers have the flexibility to turn to other crops if sugar prices fall. European sugar is produced from beet, an annual crop grown from seeds, and farmers can opt to sow wheat or rape if they offer better returns.

Nevertheless, that does not assure them profitability, especially if the prices for all crops are in the doldrums.

In the dairy market, the EU last year stepped in to buy some supplies to support prices, while introducing voluntary cuts by compensating farmers for not producing milk. The European Milk Board wants a system put in place where mandatory cuts are enforced if voluntary reduction does not work.

Ms van Keimpema’s advice to the region’s sugar growers is that some sort of flexible central regulation is needed: “Make sure you have a tool to also put on the brakes when overproduction is threatening prices.”
Source: FinancialTimes

Link: https://www.ft.com/content/a138e9a8-e2cd-11e6-8405-9e5580d6e5fb

 

Legal notice on Intellectual Property in digital content

All information contained in these pages that is NOT the property of eDairy News and is NOT considered "in the public domain" by legal regulations, are trademarks of their respective owners and recognized by our company as such. The publication on the eDairy News website is made for the purpose of gathering information, respecting the norms contained in the Berne Convention for the Protection of Literary and Artistic Works; in Law 11.723 and other applicable norms.

Any claim arising from the information contained on the eDairy News website will be submitted to the jurisdiction of the Ordinary Courts of the First Judicial District of the Province of Córdoba, Argentine Republic, with a seat in the City of Córdoba, to the exclusion of any another jurisdiction, including the Federal.

Deja una respuesta

Tu dirección de correo electrónico no será publicada. Los campos obligatorios están marcados con *

Related news