EC MAY OFFER INTERVENTION SUGAR TO LOCAL MARKET
Sugar which EC producers plan to sell
into intervention may be offered by the European Commission for
sale within the Community, broker C. Czarnikow says in its
latest sugar review.
    The Commission will propose to offer the sugar at a very
nominal premium of 0.01 European Currency Unit (Ecu) to the
intervention price, with detrimental consequences for
producers' returns, Czarnikow says. The move is seen as an
attempt to persuade the producers to take back the surrendered
sugar.
    The Commission may also take other steps to dissuade
producers from their chosen course, such as removing the time
limit on storage contracts, which presently means that
intervention stocks have to be removed by the end of September,
Czarnikow says. There is also the possibility of production
quotas being reduced.
    If the Commission decided to offer the sugar to traders for
export, the restitutions would have to be higher than those at
recent export tenders, Czarnikow notes. To match the difference
between the EC price and the world market price, the extra
costs might be as much as 20 Ecus per tonne, it says.
    The producers might have to repay these costs through
production levies and the proposed special elimination levy,
Czarnikow says, but it would be several months before any costs
could be recovered under EC rules.
    The primary cause of the plan to sell 775,000 tonnes of
sugar into intervention in France is dissatisfaction with the
EC export program as the restitution has increasingly failed to
bridge the gap between the EC price and the world market price,
Czarnikow notes. The French move is thus seen as a form of
protest designed to force the Commission's hand.
    In West Germany, 79,250 tonnes have been tendered for
intervention, but Czarnikow says the motive here is to ensure
that the 1986/87 price is paid for sugar that was produced in
1986. In addition to a two pct cut in the intervention price,
West German producers face a further price reduction in July
with a probable revaluation of the "green" mark.
    Even if the immediate crisis is resolved, the problem is
not expected to disappear permanently. It has appeared to
traders for some years that the EC's export policy is
insufficiently responsive to changing patterns of demand, it
says.
    The weekly tenders should respond to fluctuating demand by
increasing or reducing the tonnage awarded, Czarnikow says,
suggesting that the Commission might also take steps to cut
down the amount of "unnecessary bureaucracy" surrounding the
export tender system.
 Reuter
