Scient ific Papers Series Management , Economic Engineering in Agriculture and Rural Development [619649]

Scient ific Papers Series Management , Economic Engineering in Agriculture and Rural Development
Vol. 1 8, Issue 4, 2018
PRINT ISSN 2284 -7995, E-ISSN 2285 -3952
1 EFFECTS OF THE LIBERALIZATION OF EUROPEAN SUGAR
MARKET IN ROMANIA

Daniela Nicoleta BĂ DAN , Ionuț Laurenț iu PETRE

Research Institute for Agriculture Economy and Rural Development , 61 Mărăști Boulevard ,
District 1, 011464, Buchares t, Romania, Phone: + [anonimizat] , Emails:
[anonimizat] , [anonimizat]

Corresponding author : [anonimizat]

Abstract

In this paper we will make analyse of the sugar market in the context of the liberalization of the European market,
taking into accou nt both the situation at national and at European level. Will be analysed the evolution of the areas
under sugar beet and sugar cane , sugar production, prices and sugar consumption . It will be attempted to
demonstrate the economic theory that it is claimed that: by reducing the price level of a particular food, the quantity
bought is higher than consumed, thus resulting in the stocks. Studying the evolution of all elements of the sugar
market, will be identified the main effects of the quotas elimination on this market.

Key words : sugar market, consumption, prices, supply, liberalization

INTRODUCTION

Agricultural markets have a growing interest
lately, because the wo rld population is
increasing focus on issues such as food and
nutrition security . Agric ultural markets can
also be highlighted by other concerns, namely
global warming , but also the difficulties that
these commodity markets have encountered.
From these markets is also part the sugar one,
this changing frequently , sugar being among
the produc ts with high volatility. [6]
Worldwide, at present, sugar is produced
either from cane or from beet, in over 130
countries.
Continent that produces the largest quantity of
sugar beet is Europe, which owns half of the
world production of sugar beet. But mos t of
the world's sugar is obtained from sugar cane,
about 80% of total sugar production.
Worldwide, the largest sugar -producing
countries are Brazil, Thailand, India and
China , (Romania 64th), and in Europe: France,
Germany, Poland, and Romania ranked 15th
with 232 tonnes (2014).
European sugar production in 2016 accounted
for 9 .17% (15.47 million tonnes of sugar from
world sugar production of 168.587 million
tonnes), this percentage being explained
above, respectively Europe producing half of the productio n of sugar beet in the world,
accounting for only 20% of world sugar
production. [12]
At international level, sugar trade reaches
almost 60 million tons / year, of which about
60% of international trade is represented by
raw sugar.
According to ISO data, wo rld sugar
production has increased from one year to the
next, managing to exceed demand, which
means that sugar stocks have risen, reaching a
record high of 78.89 million tonnes (2015). [1]
By liberalizing the sugar market in the autumn
of 2017, there may be more long -term and
medium -term effects. Thus, by this approach,
the first socio -economic effect is the increase
in sugar supply which will be analysed in the
continuation of the paper.
By increasing supply on the sugar market, as
economic theory says, t he next easy -to-
anticipate effect is that of lowering prices , a
beneficial effect for sugar consumers . As a
result of the increase in the supply and the
price reduction, the third effect can also be
expected, namely the increase in sugar
consumption. [2][5]
These three major effects are the main
analysis hypothesis of this paper. Thus, the
abolition of sugar quotas can substantially
alter the main elements of the sugar market in

Scient ific Papers Series Management , Economic Engineering in Agriculture and Rural Development
Vol. 1 8, Issue 4, 2018
PRINT ISSN 2284 -7995, E-ISSN 2285 -3952
2 Romania ( which is not stable) but also at the
European level .

MATERIAL S AND M ETHOD S

In order to identify the main effects of the
liberalization of the sugar market in Romania,
in the first part of the paper in order to create
an overview will be analysed the market and
the components. It will analyse the evolution
of cane and bee f production, total sugar
production, prices and consumption evolution
with the help of statistical data taken from
national, European and international databases
in quantitative and qualitative terms.
Following this analysis of the sugar market
developmen ts, one can observe the trends
generated by market liberalization and the
associations between this phenomenon and
the dynamics of the main indicators. Thus,
one or more effects could be established
following the withdrawal of the quota system
for sugar.

RESULTS AND DISCUSSIONS

Europe occupies the first place in the wo rld at
sugar beet production, owning half of world
production . It should be noted that beet sugar
represent 20% of total sugar production and
Europe owns about 10% of production in the
sugar market.
Starting from this point, we will be analysed
the surface and production of sugar beet of the
national level and the European level.

Table 1. Evolution and productions areas of sugar beet
areas in the European Union during 2014 -2018
EU 28 2014 2015 2016 2017 2018
Area (1000 ha) 1,632.4 1,420.3 1,498.7 1,750.3 1,715.3
Production (1000 t) 131,021.8 101,872.1 112,404.0 142,787.3 (P) 143 ,058.5
Yield (t/ha) 80.3 71.7 75.0 81.6 83.4
Source : ec.europa.eu, Eurostat

According to Eurostat data, t here may be
significant changes in the area planted with
sugar beet in the 2014 -2018 period , thus, a
reduction in surface area may be noted in the
first half of the period, but in the second half
there is an increase in surface area. On average we can talk about an increase in sugar
beet area in the EU, with an annual average
rate of 1.24%.
As regards the total production obtained from
these areas, the European Commission
foresaw this production for 2018. It can be
noticed that the total European Union sug ar
beet production maintains the trend of the
cultivated surfaces, but in 2018 there can be
seen an increase compared to 2017, which on
the indicator the cultivated area is a decrease,
here it can intervene the effect of withdrawing
sugar quotas, thus incr easing production.
Total production recorded an average growth
rate of 2.22% on average, being higher than
that of the cultivated area, which shows, as
can be seen from the third indicator, the
average yield per hectare, an intensive
increase of in the sec tor.
The average yield per h a was calculated by
the production obtained on the cultivated area,
so we can observe oscillations from one year
to the next, given the dependence of this
sector on external factors (climate, soil, etc.).
Thus, in the weaker yea rs, from the point of
view of production, a lower yield (2015,
2015) can be obser ved, being 71.7 tons per ha ,
but in the last year it can record a yiel d of up
to 83.4 tons per ha . The average annual
growth rate for this indicator is lower than the
other, a t 0.96%.

Fig. 1. The sugar beet areas and sugar production in
Romania during 2010 -2017
Source: own processing based on ec.europa.eu data,
Eurostat [10]

The agricultural area used in agricultural
holdings in Romania represents
approximately 55.9% of th e total area of the
country (23.8 million ha), of which about 9.3
million hectares represent the arable land. The

Scient ific Papers Series Management , Economic Engineering in Agriculture and Rural Development
Vol. 1 8, Issue 4, 2018
PRINT ISSN 2284 -7995, E-ISSN 2285 -3952
3 surface cultivated with sugar beet in 2017 is
28.7 thousand hectares, representing 0.303 %
of the arable land .
Analysing Figure 1, it can be no ticed that the
areas cultivated with sugar beet had a
fluctuating evolution reaching a maximum of
31.28 thousand hectares in 2014, with a slight
decrease of approximately 10% in the
following years cultivated until 2017.
Sugar beet production fluctuated wi th
cultivated areas, reaching a peak of 1398.57
thousand tons in 2014, being 40% higher than
the first year of 2010 (837.9 thousand tons).
The smallest production was registered in
2010 and 2011, which was 28.66% and
43.76% lower than in the last year ana lysed in
2017, due to the climatic conditions registered
in that period, and in 2013, beet production to
grow slightly. The growth rate of sugar beet
production over the analysed period was
4.64%. The production yield per hectare
ranged from 26.4 t / ha (2 012) to 41.6 t / ha
(2014), with an average of 37.83 tons / ha.
According to FAO data, there are two
countries in Europe that grow sugar cane,
namely Portugal and Spain, but according to
these data the areas are very small, even
negligible when referring t o the European
level.

Fig. 2. Determination of surface and cane production
Source: own processing based on FAO data

In period 2010 -2016, in Europe was grown a n
average of about 68 hectares of sugar cane . As
can be seen in Figure 2, the areas recorded
overall increases, with the largest area of 62
hectares in 2011, and in 2011 this was 71
hectares. If we spread these areas to the two
reed rearing countries, we account for almost
90% for Portugal and 10% for Spain. [9] Regarding the production obtained, on
average it was about 5622 tonnes of sugar
cane, and it can be observed that it follows the
tendency of cultivated areas. The smallest
production was recorded in the year with the
smallest area (2011) of 5.3 thousand tons, and
the highest in the last year of 5823 tons .
Distributing the average production over the
entire period to the producing countries in
Europe, it will be noticed that Portugal
obtained about 94.3% of production, 4.3
percentage points more than in the case of
areas, and Spain has contribu ted to this total
production of 5.7%. This shows that in
Portugal the average yield per hectare may be
higher given the pedo -climatic conditions in
this country favourable to this crop.
Figure 3 shows the evolution of global sugar
production, but also its forecast for the current
year and for 2019.

Fig. 3. Determination of the evolution of world sugar
production
Source: own processing based on data available on
Statistica.com

As we can see, sugar production over the
analysed period followed an upward tr end,
with an annual growth rate of 2.30%. The
forecasts for 2018 and 2019 for world sugar
production show that production is growing
steadily, 192 million tonnes and 188 million
tonnes respectively, which are above the
threshold of about 10.25% after the
liberalization of the sugar market. [4]
National sugar production in Romania has
been increasing over the period under review,
reaching 472.9 million tonnes in 2016, 1.66
times higher than in 2011 (283.9 million
tonnes). The annual growth rate of sugar
produ ction is 3.95%. [3]

Scient ific Papers Series Management , Economic Engineering in Agriculture and Rural Development
Vol. 1 8, Issue 4, 2018
PRINT ISSN 2284 -7995, E-ISSN 2285 -3952
4

Fig. 4. Determining the evolution of national sugar
production (Romania)
Source: own processing based on MADR data

If Romania had 33 sugar factories in the early
1990s, only the Agrana and Tereos groups are
currently active, with Aust rian and French
majority capital. Local sugar production has
gone through three decades through major
changes by shutting down dozens of sugar
factories, the main problems being based on
the abolition of EU sugar production quotas
which leads to overproduc tion by European
countries holding the majority (such as
Poland, France) on the sugar market, thus
lowering the price.
By analysing only the supply components on
this market, we can say that the average trend
of these indicators is increasing, given that
both sugar beet and raw sugar production
increased in 2018 compared to 2017 market
liberalization), the most significant difference
being recorded in world sugar production.
Depending on the first results, the increase of
the market supply, a "snowball" eff ect may be
that of price (reduction) change. In order to
assess this effect, we propose in the next part
the analysis of the sugar price evolution.
As can be seen in Figure 5, the price of sugar
recorded a downward trend in the market in
2012 -2015, followe d by a rise in 2016, when
it exceeded 0.4 $ per kilogram, and will fall
next year to 0,35$ per kilogram.
In Figure no. 6, it can be noticed that with the
prices are getting lower because of the
increase of the supply sugar. In 2017, in the
first quarter, t he sugar price was 0.434 $ per
kg following a downward trend.

Fig. 5. Determination of sugar price evolution
Source: own processing based on http://macrotrends.net
data

Fig. 6. Determination of price evolution per quarter
2017 -2018
Source: own proces sing based on http://macrotrends.net
data

The average quarterly rate over the past two
years is -9.5%, reaching in the penultimate
quarter of 2018 a record low of $ 0.239 per
kilogram.
Next, we propose to evaluate the possible
effects of the withdrawal of sugar quotas in
the sphere of demand, analysing the
consumption of sugar.
As can be seen in Table 2, the average annual
consumption of sugar per capita registered a
slightly decreasing trend during the analysed
period, averaging 0.2% each year, and
extrap olating to the total population, which is
and this decreasing, there is a more
pronounced fa ll of up to 0.68% per year.
By comparing the first quarter of 2017 to
2018, we can see that the consumption fell by
5.86% per capita and the total by 6.18% per
capita. [8]
But also by analysing the quantities of sugar
purchased, there is still a decreasing trend in

Scient ific Papers Series Management , Economic Engineering in Agriculture and Rural Development
Vol. 1 8, Issue 4, 2018
PRINT ISSN 2284 -7995, E-ISSN 2285 -3952
5 the period 2010 -2017, with an average annual
rate of -0.14%.

Table 2. The consumption of sugar in Romania
Specification s 2010 2011 2012 2013 2014 2015 2016 2017 Q1 2017 Q1 2018
Average annual
consumption per
person (kg /
person ) 9.05 8.89 8.78 8.94 9.11 9.20 8.95 8.92 8.39 7.90
Total annual
consumption
(tons) 183,193 179,153 176,209 178,699 181,399 182,444 176,413 174,648 164,305 154,159
Quantity bou ght
per person per
year (kg /
person) 9.46 9.08 8.90 9.31 9.74 9.78 9.37 9.36 8.06 8.08
Total quantity
purchased (tons) 191,454 183,021 178,616 186,135 194,066 193,862 184,690 183,345 157,959 157,673
Stocks (t) 8,261 3,868 2,407 7,436 12,667 11,418 8,277 8,697 -6,347 3,514
Source: own processing based on www.insse.ro data [13]

Comparing the first quarter of 2018 with the
same perio d in the previous year, we can see
that there has been an increase in the amount
of sugar bought by one person. The quantity
purchased annually in the first quarter of 2018
covers annual average consumption
requirements exceeding 2.27%, a situation
not seen in the same period of the previous
year when consumption requirements
exceeded the quantity purchased by one
person.
Consi dering sugar a perishable product, the
difference between the total amount of sugar
bought and the total consumption considered
as stocks was made.

CONCLUSIONS

In the present study , we wanted to analyze the
consequences of the phenomenon of
liberalizat ion of the sugar market, the main
action being the abolition of quotas in autumn
2017 .
During the analysed period 2010 -2017, both
at national and European level, has been
observed an increase in sugar beet production,
resulting in an increase in sugar prod uction. It
can be predicted that in 2018 there will be an
increase in production by 10% more than in the previous year . (following the withdrawal
of quotas).
Another possible effect, following the
increase in supply, is the fall in sugar prices,
making it an affordable food for every person;
in the first three quarters of 2018, the lowest
prices in the last years.
Even if sugar consumption didn't i ncrease,
even decreasing in some periods, a link could
be made between the quantity of sugar
purchased and t he price drop, because in the
1st quarter of 2017 the quantity bought was
over the consumed, and the next year during
the same period, the quantity bought was
higher than the one consumed by inventories,
a fact known in economic theory when the
price of basic foods is lower.
Concluding, we can say that, following the
eliminations of quotas, short -term effects
were: increased sugar production, a
significant drop in prices and the creation of
sugar stocks by the population .

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Vol. 1 8, Issue 4, 2018
PRINT ISSN 2284 -7995, E-ISSN 2285 -3952
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