Executive Briefings

End of EU Sugar Quota Could Cut Prices Across Supply Chain

The EU's scrapping of long-held quotas on sugar could create a new era of lower prices, with implications reaching the whole the sugar supply chain.

As of this month, sugar firms in the EU can now produce and export as much as they want.

Callum MacPherson, head of commodities at Investec in London, said ending the quota could see a knock-on effect for the whole supply chain, ending in a fall in price for consumers.

“Ultimately, the end of the quota could result in cost reduction for food, pharmaceutical and other manufacturers who use sugar and this may result in a cost reduction for the end consumer,” he said.

“If EU prices begin moving in line with international prices it could lead to greater volatility than sugar users in the EU have experienced in the past. However, thus far, prices for sugar supply contracts in the EU going into the post quota period are still being agreed at a significant premium to international prices.”

EU sugar prices, which have traded at a premium to the world price, are set to move more in line with global rates, according to Rabobank.

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As of this month, sugar firms in the EU can now produce and export as much as they want.

Callum MacPherson, head of commodities at Investec in London, said ending the quota could see a knock-on effect for the whole supply chain, ending in a fall in price for consumers.

“Ultimately, the end of the quota could result in cost reduction for food, pharmaceutical and other manufacturers who use sugar and this may result in a cost reduction for the end consumer,” he said.

“If EU prices begin moving in line with international prices it could lead to greater volatility than sugar users in the EU have experienced in the past. However, thus far, prices for sugar supply contracts in the EU going into the post quota period are still being agreed at a significant premium to international prices.”

EU sugar prices, which have traded at a premium to the world price, are set to move more in line with global rates, according to Rabobank.

Read Full Article