Under fierce criticism for distorting sugar prices - in Europe currently trading at three times the world price - the plan from Brussels has been welcomed by food makers who see the changes as leading to a much more liberal sugar trading structure.
But Craig Ruffolo at commodities research firm McKeany-Flavell said if the European Commission proposals were implemented over the coming years, it would only reduce EU exports by about 2 million tonnes.
"Brazil could easily make up that reduced supply on the world market without any significant effect on price," Ruffolo told the International Sweetener Symposium, sponsored by the American Sugar Alliance (ASA), the national coalition of growers, processors and refiners of sugarbeets and sugarcane, accounting for 146,000 US jobs.
The 25 EU member states still have to approve proposals, but the plan from Agriculture Commissioner Franz Fischler tabled in mid-July to the Parliament is for a one-third cut in the institutional sugar price rolled over three years and starting from the 2005-6 campaign.
The reform will also see a gradual reduction of overall volumes by 2.8 million tonnes from the current 17.4 million tonnes over the next four years. In line with recent CAP reform, Fischler also proposed a decoupled payment for sugar beet farmers to partially compensate (60 per cent) for income losses.
The proposals will now be debated in Parliament before being passed to the Council of Ministers, which might adopt any changes to the proposals. Food makers hope the member states will stick with the proposed Commission rules and avoid making any changes to the proposal.
"As one of the major stakeholders in the reform, we have been encouraged by the willingness of the Commission to consult widely on this dossier," David Zimmer, secretary general at the European chocolate, biscuit and confectionery industries association CAOBISCO recently told FoodNavigator.com.
"We expect this level of consultation to continue in the next stages of the process to ensure that the proposal is strengthened and not subject to any dilution, which would only prolong the absence of competition in the industry."
A Commission spokesperson told FoodNavigator.com that the final decision could be taken within 12 months, although the move is off to a slow start as the next Council meeting is not until 18-19 October. And even then, the Dutch presidency will decide if sugar proposals are on the agenda.
Ruffolo predicted that world sugar prices would remain low, "in a range between 5 and 10 cents per pound," for the next several years, as surplus stocks continue to be high. He noted that Brazil's sugar production has more than doubled in the past 10 years and that Thailand, 'a long-time surplus producer' is showing 'a re-emerging commitment to sugar.'
Jack Roney, ASA economist who moderated the panel on the world sugar outlook commented: "Unfortunately, the world sugar market will remain depressed, at levels barely half the world average cost of producing sugar, because of continuing subsidies not just by the EU, by a host of major sugar- producing countries. Paramount among the major exporters is Brazil, whose sugar industry has benefited from decades of cross-subsidy from Brazil's massive cane ethanol program."
"Mr. Ruffolo's analysis reinforces the ASA's view that world sugar market prices will only recover through sugar policy reform among all the major sugar-exporting countries, and this can only be achieved through comprehensive, multilateral negotiations in the World Trade Organisation."