Concentration trend on sugar market

Producers of the domestic sugar industry expect a concentration on the sugar market, two three players being expected to cover the entire production, daily Business Standard reports on Aug. 27.
If in 1990, Romania had 38 plants of sugar obtained from sugar beet, production capacity that covered the domestic production and allowed exports, for this year (October 2007-September 2008) the Agriculture Ministry extended production quotas for 8 companies, some of them resorting to partnerships.
The first concentrations have already occurred. "As we anticipated we are witnessing the concentration of the sugar production through acquisitions and merger and we will see other similar moves. Even if in the case of sugar production made from beet nothing has changed yet, I expect, and this is my personal opinion – that in about one year we'll have a different image and one or several producers will sell their quota in Brussels or in competition or go bankrupt," Emilian Dobrescu, the general representatives of the Austrian company Agrana in Romania told daily Business Standard.
Gheorghe Bejan, CEO of the Sugar Employers' associations of Romania deems that only 2 producers will maintain in 2010 and they will cover the entire need for Romania. According to Bejan, one can notice a natural tendency of concentration on the sugar market, on the criteria of economic efficiency. The plants will depend on the price of beet and on the subsidies for this culture, he said, adding that he does not rule out the possibility that some plants owned by foreign companies be shut down within reorganization programmes.

Experts deem that Romania's advantages in the sector are still cheap labour force, retail and rising consumption, as well as rise in the production facilities of the sugar industrial consumers – producers of soft beverages, sweets, wine and alcohol.
Romania obtained, following the negotiations with the European Union a quota of 109,164 tonnes for beet sugar plus the quota for the processing of the sugar from sugar cane (329,636 tonnes), as well as a quota of 9,900 tonnes of isoglucose, raw material in the industry of soft beverages and other fields.
According to representatives of the Employers Sugar Associations of Romania, over 1998-2003 (the benchmark for which the calculations were made for the negotiations of production quotas) poor productions were reported. In that period several plants were not operational, the privatized plants were under reconstruction and following the relaxed policies of imports, many units had already switched to the production of sugar from imported gross sugar.
The sugar consumption in Romania is of over 600,000 tonnes a year, the average per capita being of 28 kg. compared to 35 kg, in the European Union. Bulgaria, for instance, has an annual consumption of some 260,000 tonnes, which is some 390 kg,. of sugar per capita.
The areas under sugar beet amount this year to 23,000 hectares, down as against last year.
However, Romania will achieve the production quota for 2008 at sugar beet, allotted by the EU, said Ioan Armenean, general manager of Zaharul Ludis (Mures county, centre Romania). Farmers of sugar beet receive in 2008 a subsidy worth 380 euros per tonne.
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