Consumer prices of sugar are projected to reduce substantially on increased supplies in the global market after the European Union (EU) formally scrapped quotas on the production and sale of the commodity after nearly 50 years.
The end of the quotas means that there are no further limits to production or exports, allowing production to adjust to market demand both within and outside the EU.
“Producers will now have the opportunity to expand their trade on global markets,” Phil Hogan, EU Commissioner for Agriculture and Rural Development, said in a statement following the close of production quotas on September 30.
An analysis by the European Commission showed the end of the system will trigger a jump in sugar production. It said that between 2016 and 2026 the bloc’s sugar production will increase by six per cent while production of an alternative sweetener, Isoglucose, could triple from 700,000 tonnes to 2.3 million tonnes.
Imports will, on the other hand, continue to drop from 3 to 3.5 million to 1.8 million tonnes and exports are expected to increase from 1.3 million tonnes to 2.5 million tonnes. “For the upcoming harvest, no longer bound by the limitations of the quota, an increase in production of roughly 20 per cent (20.1 million tonnes) is expected. This increase results from both an increase in area and higher yields because of good climatic conditions,” the EU said.
The EU’s move could provide a boon to consumers in nations such Kenya where prices of the commodity remain high due to inefficiency and low production. Kenya mainly relies on imports from regional and international markets to cover for a production shortfall.
The Sugar Directorate said traders and millers imported 300,000 tonnes of sugar in August alone ahead of the August 31 expiry window of a duty waiver on cheap sugar from Brazil.