SA sugar producers seek interim EU trade pact

South African sugar producers are seeking an interim duty-free export deal for sugar to the European Union (EU) as talks for a quota and tariff-free access into the bloc continue, an industry official said.

The EU, South Africa’s largest trading partner, unveiled a new trade regime last year that allowed the world’s poorest countries quota and tariff-free access into the market.

South Africa, the continent’s biggest economy, is not regarded as a least developed country and consequently does not benefit from the European Union regulation.

Trix Trikam, executive director of the South African Sugar Association (SASA) said on Thursday the industry was still in talks with the South African government and the EU to conclude an economic partnership agreement that would allow producers to export sugar into the bloc.

“In the short-term, we believe that asking for a fixed amount of sugar at duty-free is the way to go. In the long-term we would like what everyone has got, no quota, no duty,” Trikam told Reuters.

“If we get the (EU trade deal) we can enhance the revenue. Generally, the price you can earn in the EU market is better than what you would earn on the world market.”

The EU has become the world’s biggest sugar importer after the bloc reduced subsidies to its farmers.

A senior European Union official last month forecast an increase of more than 1 million tons in annual EU sugar imports by 2014/15.

South Africa, one of the world’s top 10 exporters of the sweetener, exports about 40% of its sugar and the industry’s annual export earnings stands at 2,5 billion rand ($344,4 million).

Trikam said South African sugar producers need to boost their revenue and in return increase output.

Falling yields

South Africa’s 2009/10 season total sugar production dropped to a 15 year low of 2,18 million tons, hurt mainly by rising input costs.

“Total production over the last three years has been declining. We used to produce an average of 2,5 million tons of sugar (annually), but our average these days is around 2,2 million tons,” Trikam said.

Delays in the finalization of South Africa’s land reform programme, meant to hand over 30% of farm land to the country’s black majority by 2014, is raising concerns in the industry, he said.

Trikam said uncertainty was discouraging new investments while farmers were not sure whether they would retain their land once reforms are instituted.

South Africa this year also faces a drought in the rain-dependent sugar growing area of Kwazulu Natal Province which is likely to cut output further.

The latest forecast shows that South Africa’s sugar output for the 2010/11 season may be lower than last season’s at 2,141 million tons.

“If we start getting better revenues and the drought leaves us, I see an improvement. Our target is to go back to at least the average of 2,5 million a tons,” Trikam said.