Danisco's sugar production in line with new regime

The company said that its first beet harvest forecast indicates that sugar production should total 988,000 tonnes, suggesting that a smooth transition to the new regime might be possible.

Reform of the EU sugar regime has been a long time coming. There has been intense pressure for years on the EU, the world's third-largest sugar producer, to change its heavily criticised regime that artificially which supported internal prices at three times the world level.

But the reforms, which came into effect on 1 July 2006, feature a number of concessions designed to give European sugar producers a viable future. First there was the climb-down from the original proposed 39 per cent price cut to a figure of 36 per cent, and most significantly for sugar producers, there was agreement the sector would be compensated for, on average, 64.2 per cent of this price cut.

This has given the sugar industry reasons to be hopeful. A recent Standard & Poor's Ratings Services study, entitled 'Sweet'N Slow: Gradual Liberalisation Of EU Sugar Regime Preserves Credit Quality',​ said that the gradual nature of the reform should provide a fairly protected environment for European manufacturers over the next four years.

Danisco has worked to ensure that its beet and sugar production have been adjusted to the terms of the new EU sugar regime, under which sugar production in the EU will be reduced and C sugar production will cease.

So far, Danisco's sugar production has significantly exceeded the quota (C sugar), but that will not be the case this year, partly as a result of climactic conditions.

This year's first field samples of beets were made on 14 August 2006 in Denmark, Sweden, Germany, Finland and Lithuania. Danisco said that the beet sample results do not change the previously announced expectations for Sugar's earnings in the current financial year.

In Denmark, germination was good following the late sowing, but growth has been limited due to the warm summer weather and insufficient rain. "In consequence, we expect sugar production close to the Danish EU quota,"​ said the company in a statement.

Sweden, Germany and Lithuania have had almost similar growth conditions to Denmark but with shorter drought periods, bringing prospects of production slightly above the national EU quotas in these countries.

In Finland, beets were sown at the usual time of year. There, too, growth conditions were characterised by high temperatures and little rain.

Based on the current harvest forecast, sugar production in Finland is expected to be slightly below the quota. "We expect to cover this shortage by transferring sugar from 2005,"​ said Danisco.

As in previous years, two samples in all will be made. The results of this year's second sample will be announced at the beginning of September.