Wednesday, February 23, 2005

Sugar mountain is back

The EU has had to accept sales of sugar into intervention for the first time in nearly twenty years. Sugar is understood to have been offered in both France and Belgium and the intervention authorities are obliged to accept any product that meets basic quality criteria. The last time this happened was in 1986.

Normally EU sugar surpluses are dumped on the world market with the assistance of what is in effect an export subsidy system. But traders are unhappy about the current EU export refund rate for sugar which they think is not enough to let them sell their surpluses at a profitable price. In particular the weakness of the $ against the € has caused problems in world markets. Hence, the intervention sales are as much a political ploy as anything else.

As far as the Commission was concerned, 'It shows once again the urgent need to reform the system.'

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