High sugar tariffs in the EU and US sugar programme causing concern for confectionery companies

Confectionery manufacturers do not expect any real relief in sugar prices for the new sugar marketing year that begins on 1 September. Sugar is the last EU agricultural sector protected by the market organisation with its protective tariffs, which is putting pressure on small and medium-sized companies in particular.

According to the EU Commission's (EC) own figures on European industrial selling prices for sugar, the price rose dramatically last year and is currently at an all-time high. In June 2023 it was over 80% higher than the previous year.

The EC expects a slight increase in production volume of 6% to 15.5 million tonnes. The BDSI argues that this is still far from being enough to adequately cover the European demand of consumers and the food industry of 17.5 million tonnes.

Germany’s export-oriented confectionery industry is being significantly weakened in international competition due to sharply increased sugar prices as well as higher energy costs at home.

The inflation developments in certain areas are ’homemade’, said the BDSI, which, together with other sugar processing sectors, has criticised the political structure of the European sugar market.

The sugar market is still largely shielded from the world market with high protective tariffs. The few import quotas the EU allows other producers are too inflexible and only available to European sugar suppliers. The European sugar industry must first refine the imported unfinished raw sugar into white sugar. However, this so-called ‘additional refining’ is not done to relieve the market but to extend the sugar campaign, critics claim.

The BDSI is calling for more market orientation, consideration of climatic change in European sugar beet cultivation, and a suspension of high protective tariffs so that sugar can also be imported from other regions of the world.

Political countermeasures would be necessary to curb the shortage on the market and price inflation for sugar. “In this extremely tense situation for the confectionery industry in Germany and the European Union, the EU Commission must finally act and open the European market for white sugar imports in the short term​,” said Bastian Fassin, Chairman of the BDSI.

"Despite the high sugar prices, the EU's sugar production is still far too low and the supply situation is at risk. This clearly shows that this is not possible without further import quotas or the suspension of the protectionist EU protective tariff​."

In addition to these short-term measures, the BDSI believes that a long-term realignment of the EU sugar market is absolutely necessary.

In April this year, CIUS, which represents the European sugar-using food and beverage industries with more than 15,000 companies across Europe, said sugar users face a loss of competitiveness due to the current sugar market situation and also called for urgent political action.

The EU sugar supplies are tightening consistently, and the high-risk unfavourable scenario keeps on repeating itself: sugar supplies between agricultural years (October-September) are so low that the most vulnerable sugar users (SMEs) face critical shortage situations leading to dramatic economic consequences, such as factory closures and job losses.

“Not only do sugar users have difficulties to pass on the important price inflation to their customers in the food retail sector, but prices are also acting as a major driver of food inflation, putting a strain on consumers’ budgets wherever this price inflation occurs​,” it said. CIUS also called for an immediate suspension of import tariffs on white sugar to supply the market to avoid dramatic and irreversible economic consequences to the sugar-using food and drink industry.

US sugar programme

The problem of high sugar import tariffs is not only confined to Europe. The US sugar programme is also causing shortages for companies that could affect confectionery and candy production ahead of the important Halloween holiday season.

As reported in this publication​, US candy producers said the root of the problem lies with US agriculture policy, which requires at least 85% of domestic sugar purchases to come from domestic processors, leading to tight supplies and high prices when demand rises.

The National Confectioners Association (NCA), which represents more than 500 confectionery companies, brokers and suppliers, said as a result, American businesses are forced to operate at a competitive disadvantage, paying twice as much for sugar as their foreign competitors - and it is pushing for changes to the sugar programme that would help increase supply when demand is high.