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EU to Boost Sugar Exports, Defying Australia, Brazil

February 3rd, 2010

The European Union approved exports of an additional 500,000 metric tons of sugar above an annual limit permitted by a World Trade Organization decision, defying calls from Brazil, Thailand and Australia to respect the quota.

Brazil said today it doesn’t rule out responding with a WTO complaint. The proposal to lift exports in the 2009-10 season drew no objections from EU officials by today’s deadline, said Johan Reyniers, a spokesman for the Brussels-based European Commission, the 27-nation bloc’s executive arm.

Brazil, Thailand and Australia, the top sugar exporters, this week asked the EU to scrap the plan because its shipments of the sweetener would exceed the quota. The WTO in 2005 limited EU exports of subsidized sugar to 1.37 million tons following a complaint by the three countries.

“The quantities authorized for export are not benefiting from any subsidy, directly or indirectly,” Reyniers said by phone. “Therefore they are not to be counted as part of the exports that the EU is allowed under WTO law.”

The EU has said it would raise exports as a “temporary measure” in response to a doubling in sugar prices over the last year and the bloc’s record harvest. The additional exports would be enough to make about 14 billion cans of Coca-Cola.

“We don’t rule out any course of action at this point,” Roberto Azevedo, Brazil’s ambassador to the WTO, said by phone from Geneva. “If the EU is claiming that they are no longer subsidizing sugar production in the EU, we have a problem.”

Sugar Declines

White, or refined, sugar for May delivery fell as much as 0.3 percent to $733.50 a ton in London trading following the EU decision, after rising as much as 1 percent earlier.

The EU decision “won’t go unnoticed,” Azevedo said. “Since prices are high at this point in time, the effect will be to damp the prices somewhat and, of course, exporters lose.”

The commission argues that current world prices mean the EU can export more sugar without violating WTO subsidy commitments. The EU reference price, the basis for negotiations with importers and the sale of so-called intervention stocks, stands at 404.40 euros ($566.52) a ton.

“On the question of sugar, the French position is the EU position,” Bruno Le Maire, France’s agriculture minister, told journalists in Paris today. The country is the EU’s largest sugar producer.

Sugar prices doubled in 2009 after output was hurt by rains that were too heavy in Brazil and too light in India, the world’s biggest producers. Global demand will outpace supply by 13.5 million tons this season, according to broker Czarnikow Group Ltd.

“Australia, Brazil and Thailand disagree that the trade distortions produced by the European Union’s sugar regime were eliminated by circumstantially high international prices,” the countries said in a joint statement on Feb. 1.

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