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02 November 2024

News

23.09.2024

A chance for survival: Will Ukrainian sugar find its way to European shelves?

Historically, sugar is considered a sensitive product in the European agricultural sector, as European producers are supported under the EU's Common Agricultural Policy, while the sugar sector is subject to strict regulation by the EU's Common Market Organization.

This is one of the reasons why the European Commission included sugar in the list of products subject to special safeguard measures under the EU's Autonomous Trade Measures for Ukraine, a package of temporary trade liberalization measures designed to support the Ukrainian economy during the war. Since June, the export of Ukrainian sugar to the EU has been stopped as the quotas have been exhausted.

The prospects of Ukrainian products on the European Union markets in the light of European integration were discussed during a discussion organized by the UCAB.

 

In search of compromises

The issue of transformation of the sugar industry in Ukraine in the context of the EU markets is a key one, said Alex Lissitsa, President of UCAB: “The EU imports sugar from sugarcane every year, with the volume of supplies from Ukraine amounting to less than 10%. Unfortunately, all is not very sweet in the relationship between the European Union and Ukraine, rather hot. Sugar is one of the most important and most open topics, and there are constant discussions about what to do with Ukrainian sugar in Europe. However, our path to the EU is already inevitable, so it is worth finding compromises”.

The EU needs to take into account production in Ukraine when calculating sugar market balances, Deputy Minister of Economy, Ukraine’s Trade Representative Taras Kachka has said: “We also need to develop a new, peaceful approach to trade and sugar. We need to have predictability in trade flows. And Ukraine is open to different ways of self-control. Export licenses are tools that can help to really increase the transparency of trade flows so that the interests of sugar producers in the EU are not harmed. That is the context, and I hope we will continue our work in the coming months with the new European Commission on these modalities”.

According to him, the quota specified in the Association Agreement is no longer in line with current realities and the interests of both sides. A new balance and a new quota are required.

 

Significant imports

Europe has always been a structural importer of sugar, recalled Yuriy Sharanov,President of the Committee of European Sugar Users (CIUS): “Usually the average volume of purchases was about 2 million tons, but in 2022-2023 imports exceeded 3 million tons. This created a rather tense situation on the market. The European sugar price has been one of the highest in the world, peaking last year. The large deficit obviously stimulates even more supply. Fortunately, Ukraine supported us and provided some of its stocks”.

Now the European market is somewhat more balanced. Sugar prices in 2024 have fallen slightly. This shows that it is important to have some diversification in supply and to have different access to different origins.

 

Open market

Europe has produced about 15.8 million tons of sugar this year, Christian Spiegeleer, President of the Association of French Sugar Manufacturers (SNFS), European Association of Sugar Manufacturers (CEFS), said: “The EU is the world's third largest sugar producer after Brazil and India. Historically, the EU has been and remains a significant player in the white sugar market worldwide, especially in the Mediterranean and the Middle East, which have been our traditional export markets. But we also import sugar in fairly large volumes. To date, imports total 2.7 million tons, which is at least 18% of our domestic consumption. The market is close to self-sufficiency, because exports are about 3.5 million tons. These are the figures for 2023-2024. So the EU sugar market can be qualified as an open market”.

However, European sugar producers face a number of problems: damage due to unpredictable weather and new environmental requirements limiting the use of crop protection products. For this reason, producers are demanding the same rules of the game for all market players.

 

Together to take care of food security

Yana Kavushevska, Executive Director, Ukrainian Association of Sugar Producers, emphasized that the Ukrainian sugar industry is a natural continuation of the European sugar belt: “We use European seeds, plant protection products, buy European machinery and equipment for our factories. We do not seek competition, but want to cooperate. We are very grateful for the possibility of exporting our sugar from 2022, which really became a lifeline for us at a time when it was a matter of survival. And we are not only talking about sugar producers, but also more than 70 thousand sugar beet farmers who at that time could not export their other products because of problems with sea logistics”.

Domestic sugar growers are now trying to increase exports to the world market, as access to the EU has been closed since June 1. This was a voluntary move on the part of Ukrainian producers, as they adhere to international obligations. After the closure of the EU markets, Ukraine continued exporting sugar to other countries, particularly the Balkan countries. The volumes amounted to 13,000 tons in July and 10,000 tons in August.

“For now, exports to the European Union are not even a matter of access to a market with a good price. For us, this is almost the only available direction, as sea routes are still dangerous, we have no possibility to export to Central Asian countries, which used to be our traditional markets”, – Yana Kavushevska.

Now in Ukraine there are 33 sugar factories, 29 of them are working. 225 thousand hectares are under sugar beet. For the last two years - 250 thousand hectares. These areas are distributed between agricultural enterprises affiliated with sugar factories and independent farmers in the proportion of 60:40. The expected sugar production this year is 1.7 million tons.

Therefore, finding ways to cooperate with European producers on European markets is task No. 1 today. The industry is working on harmonizing its food safety principles with those of the European Union, as well as with all other standards. Some producers have already assumed responsibility and obligations for decarbonization. “We are ready to follow the EU requirements. It is a long way, but we would like to start it now with the support of European colleagues,” emphasized Yana Kavushevska.

According to preliminary forecasts by the Ukrainian Association of Sugar Producers, the area under sugar beet next year will shrink by 20 percent.

Ihor Shylyuk, CEO of sugar producer Cygnet, said that the sugar factory did not operate in 2022 and will resume operations in the 2023-2024 season: "As russia continues to attack port infrastructure, logistics from across the Black Sea are limited and quite expensive. Exports in containers are not yet possible because large container ships do not call at Ukrainian ports. Ukraine should export about half a million tons of sugar this year; without the European Union, this will be problematic". 

 

Without exports to the EU, production will have to be reduced

While Ukraine's accession to the EU is being negotiated, it is important to establish bilateral trade on a more permanent basis. The European side expects more predictability and reliability.

Before the war, Ukraine's sugar consumption level was 1.2 million tons, now it is 900 thousand tons.

“We have lost 300 thousand tons of consumption within the country. Therefore, the issue of exports to the EU is a question of survival of the Ukrainian sugar industry. We are closer to Europe for all considerations, not only geographical, than Brazil, where there is a problem of deforestation. It is also a question of sustainable development”, - said  Yana Kavushevska.

Ukrainian sugar growers are ready to raise the standards of their production to comply with EU regulations. “Being able to export to the EU is the only reliable way. If it is closed, we will be forced to reduce production,” continued Ihor Shylyuk.

According to experts, another impetus for the development of the industry could be the law obliging to add bioethanol to fuel.

Original material taken from the platform AgroPortal.ua

 




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