EU Agriculture Commissioner Mariann Fischer Boel warned EU farm ministers today that national sugar industries must give up more of their production quotas as agreed under last year's reform.
For the first year of the reform, which started in July 2006, industries had sold 1.5 million tonnes of quota back to Brussels at a rate of €730 per tonne - higher than the 1.0 million that the European Commission had expected.
But for the second year, where the Commission has projected 5.0 million tonnes of production being removed from the market, only 700,000 in quota was pledged so far, EU Agriculture Commissioner Mariann Fischer Boel told EU farm ministers.
"If such a small reduction in quotas happens, this will result in a serious imbalance on the sugar market for 2007/08, with ending stocks in the order of 8.7 million tonnes by September 30, 2008," she said.
Sugar producers unable to compete at final EU reference price of €404/tonne in 2009/10 should "get out now for their own benefit as well as for the overall balance of the market in accordance with the logic of our reform," she said.
Under the EU's sugar reform, agreed by ministers in 2005, a four-year buyout scheme is available for industries wishing to leave the sector at generous rates of €730/tonne in the first and second years and falling to €520 by year four.
Apart from cutting into the EU's traditionally high sugar subsidies, more than three times the world market, the idea was to encourage Europe's less competitive producers to leave the sector and so reduce oversupply.
But if the Commission decides that not enough production quota has been removed at the end of the four years, it may apply compulsory quota cuts to rebalance the market: a warning that Fischer Boel was quick to repeat to the 25 farm ministers.
"I have no alternatives. On exports we are limited ... and if we don't manage to meet targets in taking out quota, we will face the reality of making an across-the-board quota cut," she said, adding that the Commission would not bail out industry.
For the 2006/07 marketing year, three countries - Ireland , Italy and Spain - had taken the best advantage of selling back sugar production quotas at the highest buy-back rate, she said.
Italy had surrendered nearly 780,000 tonnes of quota, Ireland 200,000 tonnes and Spain 93,000 tonnes, Commission data showed.
There were smaller amounts for Sweden and Portugal.
"I am a bit surprised to see that there is not a single kilogram from new member states and I have doubts whether they would be able to stay in business when the price is going down," Fischer Boel told a news conference.
"And the decision has to be taken before January," she added.
"I don't underestimate the political difficulties ... but some countries are hiding behind the industry." The Commission wants 6.0 million tonnes of quota surrendered by national industries by the end of the four years of the so-called restructuring scheme. At present, subsidy-eligible quotas are allocated to individual EU countries each year.
The deadline for the next round of applications for renouncing quotas - and qualifying for the agreed EU buyback rates - is January 31, 2007, to reduce quotas before the start of the 2007/08 production year that will begin in October 2007.