Failed sugar reform to be restructured

The European Commission will next Wednesday (2 May) make a second attempt to stop the EU producing six million tonnes of surplus sugar every year.

Heavy subsidies for EU farmers and processing factories under 1968 agriculture rules led to over-production of sugar, of which 2m tonnes was dumped on poor countries. Under pressure from the World Trade Organization, the EU last March agreed a reform of the sugar sector.

The reform cut sugar sale prices by 36% over four years and set up a restructuring fund to pay uncompetitive processors and farmers to close down. Factories could choose between competing for sales at the new price, or being paid to cut their production quotas.

But 2007 production plans show that quotas have only fallen by 2.2m tonnes over the first two years, well below the 5m tonne target.

"The restructuring fund has obviously not been as successful as we wanted," said a Commission spokesman.

According to the Commission, sugar factories are reluctant to reduce quotas because it is unclear how much of the restructuring aid they will have to pass on to sugar farmers. The reform gave farmers the right to at least 10% of the aid but member states could decide to hand out more.

Total compensation levels were set at €730 per tonne of sugar not produced in 2006, falling to €520/tonne in 2009.

Wednesday’s proposal will allow producers to keep 90% of the restructuring money, with the remainder passed on to farmers.

The Commission is asking governments to agree a top-up fund for farmers to add to their 10% of restructuring aid.

Farmers will also be allowed voluntarily to reduce the amount of sugar they grow.

The European Commission will next Wednesday (2 May) make a second attempt to stop the EU producing six million tonnes of surplus sugar every year.