Europe's proposal to allow imports of 300,000 tonnes of sugar to tariff-free is a sign of an "acute supply problem", which was becoming evident in soaring regional prices, the International Sugar Organization said.
The European Union - which only in the autumn was considering allowing extra sugar exports – had found itself with a supply squeeze thanks to a poor beet crop, at a time when many other countries were clamouring for shipments.
Indeed, EU food and drink companies "are finding it increasingly difficult to source competitively priced supplies from the world market", the ISO, an intergovernmental group, said.
Recent moves to bolster supplies "confirm that the EU has an acute supply problem", the ISO said.
The European Commission, is planning to permit the sale, without the usual "superlevy" of E500 a tonne, 500,000 tonnes of domestic sugar produced in excess of quota levels agreed in a deal with the World Trade Organisation.
And, after in November suspending duty on so-called CXL imports from a group of favoured nations, including Brazil, it last week proposed a broader move, for a quota of 300,000 tonnes which could be imported tariff free.
Prices high enough?
Even so, the Europe still faces the question of "whether the domestic prices in the EU… are attractive enough" to win supplies against competition from other buyers, the ISO said.
Including import duty, of E98 a tonne, as well as freight costs, it had been suggested that a figure of E750 ($1,030) a tonne was needed to attract imports – a level towards which regional prices had converged.
While official data showed prices at $485 a tonne in October, "there is anecdotal evidence that during the first months of 2011 domestic prices in the EU improved to the level in excess of E700 tonne".
'Unfavourable weather'
The ISO estimated European production falling 12.3% in 2010-11 to 15.28m tonnes, in raw sugar terms, after "unfavourable weather conditions in the main beet growing areas resulted in decreased beet as well as sugar yields".
Associated British Foods said on Monday that sugar production from UK beet would tumble by more than 30% below 1m tonnes, after a rapid thaw following extensive cold damaged crop quality.
EU consumption, however, was estimated 0.8% higher at 18.12m tonnes,
The ISO foresaw EU sugar exports slumping by two-thirds to 700,000 tonnes in 2010-11.
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