FDBusiness.com

Food and Drink Industry Ireland, the main trade association for the food and drink industry in Ireland, has voiced concern about the security of sugar supply in the EU. World market sugar prices reached a 30-year high in November and 2011 will be the third year that global production/consumption has been in deficit. The group says that its members are having difficulty sourcing sugar and that a larger quantity of sugar needed to be made available within the EU.

Commenting on the issue, FDII director Paul Kelly says: “Most of the sugar consumed in Ireland is produced in the EU, which still operates import tariffs. While EU sugar refiners have covered 90% of their requirement, high prices and availability problems now mean there is a shortage of supply. In Europe as a whole, there is not enough sugar to cover existing supply contracts and this is beginning to have a major impact on many Irish food and drink companies.”

He continues: “This problem has been exacerbated by recent indications from the EU that it would be issuing 350,000 tonnes of export licences for sugar. This means that a large quantity of sugar will exit the EU, which is particularly unhelpful at a time when sugar supplies are scarce. FDII has called for this sugar not to be exported and instead to be made available to EU consumers. The European Commission’s sugar management committee has postponed a decision on this matter on two occasions in recent months. This uncertainty is not helping the situation.”

When supplies are scarce, small manufacturers find it more difficult to source supplies on the markets. Currently sugar can be sourced, but Irish food companies will have to pay exceedingly high prices to import it. The situation raises fears over security and quality of supply of the commodity. While the uncertainty remains, Irish food companies will have difficulty developing future production plans and may have to stop taking new business opportunities.

Paul Kelly concludes: “The current situation is another unwelcome example of growing input price inflation for an essential ingredient in food production. It is extremely unhelpful for end-manufacturers to have basic foodstuff commodities subject to speculation and supply constraints. Volatility is here to stay and problems are unlikely to ease until at least next year’s harvest, especially as traders remain attracted to foodstuff commodities.”