December 18, 2017 / 12:10 PM / 2 months ago

Post-quota EU sugar boom to fade, isoglucose to win share: report

PARIS (Reuters) - A surge in EU sugar production this year after the scrapping of output quotas will tail off in the coming decade as the market faces lower prices, consumer health concerns and competition from rival sweetener isoglucose, the EU’s executive said.

The EU abolished at the end of September limits on sugar production and exports, removing the bloc’s last remaining agricultural quota system.

Sugar production in 2017/18 is expected to jump 22 percent from last season to 20.5 million tonnes, but will fall back gradually to reach 18.9 million tonnes in 2030/31, the European Commission said in a report on Monday.

The ending of the quota system also removed guaranteed minimum prices and the Commission said producers would face lower prices, particularly given an expected world surplus in the short term.

The EU white sugar price was projected to stabilize at around 400 euros a ton in the medium term, compared with an average 443 euros in 2016/17 before the end of quotas. The gap between EU and world prices was expected to be around 40 euros a ton, well below levels seen in recent years.

“In an environment of higher production, combined with decreasing consumption and increased competition from isoglucose, it is difficult to see how EU sugar prices can remain substantially above 400 euros a ton,” the Commission said in an agricultural outlook report.

“This is expected to lead to some market adjustments, with production reductions in some less productive areas.”

Sugar demand was expected to be curbed by health concerns, with consumption forecast to decline to 17.5 million tonnes in 2030/31, down 5 percent from this year, the Commission said.

Sugar would also lose market share to isoglucose, a sweetener made from maize and wheat starch that had been subject to a 720,000 ton production cap under the quota regime.

Isoglucose consumption was projected to rise to 1.8 million tonnes in 2030 from 0.8 million in 2017/18, increasing its share of caloric sweetener consumption in the EU to 9 percent from 4 percent, the Commission estimated.

Isoglucose is more widely used in countries like the United States, Mexico and China.

EU sugar exports were seen dropping to 2.6 million tonnes by 2030/31 from 3.0 million expected this season.

But the EU would maintain its position as a net exporter acquired this year, with lower European prices curbing imports that would remain stable over the period, the report showed.

The projections were on the basis of a 28-country EU including the UK, since the terms of the planned British exit from the bloc were yet to be decided, the Commission said.

Reporting by Gus Trompiz and Ana Ionova; Editing by Adrian Croft

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