France’s Cristal Union scraps sugar beet price floor amid tough market

(Reuters) – French sugar group Cristal Union on Wednesday said it had scrapped minimum prices for sugar beet farmers as it expects sugar prices to fall further in 2018 after hitting historic lows last year.

A surge in output after the European Union abolished production quotas last year and a 40-percent slump in prices since early 2017 in an oversupplied world market have left many EU companies struggling with plunging profits.

“The magic world, more comfortable and predictable, in which the beet sector was living has vanished,” the cooperative group said in a statement.

French producers also face uncertainty linked to the EU and the government’s hostility to some pesticides, large-scale free trade negotiations and a “hardly understandable defence of palm oil” at the detriment of local biofuel producers, it said.

“The Group’s board therefore unanimously decided to scrap the minimum price for sugar beet as soon as the 2018 campaign,” Cristal Union said.

“This decision … is necessary to ensure the long-term sustainability of the group. Maintaining a minimum price would further distance Cristal Union from the realities of the market and weaken the operations of its members.”

The group had decided in 2016 to offer its farmer members a pivot price of 27 euros per tonne of sugar beet, pulp included, for the 2017, 2018 and 2019 harvests, with the possibility of a supplementary payment if market conditions permitted.

French rival Tereos, which on Tuesday said it was considering offering a stake to an international partner, has maintained a guaranteed price of 25 euros a tonne for sugar beet for 2018 as part of a two-year deal with its members for the after-quota period.

Cristal Union, which also makes ethanol, posted sales of 2 billion euros ($2.35 billion) for the 2017/18 fiscal year up to Jan. 31, compared to 2.5 billion in the previous one which was spread over an exceptional period of 16 months. Gross operating surplus reached 164 millions euros.

The group’s beet area rose 20 percent last year with near-record sugar yields at an average of 15 tonnes per hectare, it said.

French farmers have blocked access to more than a dozen oil depots and refineries as part of a three-day protest over plans to allow oil major Total to use imported palm oil at a biofuel plant, which would compete with biodiesel made from locally produced oilseed crops.

Sugar beet growers often cultivate other types of crops including grains and oilseeds.