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Modelling the effects of abolishing the EU sugar quota system for the sugar markets in Germany, the EU and its member states as well as the world by the end of the sugar marketing year 2017/18

Project

Production processes

This project contributes to the research aim 'Production processes'. Which funding institutions are active for this aim? What are the sub-aims? Take a look:
Production processes


Project code: TI-MA-08-PID1507
Contract period: 01.08.2013 - 30.09.2015
Purpose of research: Inventory & Assessment

The European sugar sector faces a difficult time in the coming years. From 1 October 2017, sugar beet growers and the sugar industry will lose their long-term planning security regarding production quantities and prices. How will the market react to these changing conditions? And who will be the winners and losers of the resulting market reactions? In 2006, the EU sugar market regime underwent a major reform. The first since its establishment in 1968. After the end of this 4-year restructuring period in 2010, the sugar sector is again facing radical reform. As part of the CAP Reform 2014, the production quotas for sugar and isoglucose, which are fixed production quantities allocated to producers, will be abolished at the end of the sugar marketing year 2016/17. Simultaneously, the minimum price for sugar beets is removed on 1. October 2017. After quotas are lifted, European beet and sugar prices are solely supported by border protection measures, i.e. import tariffs, and a reference threshold price. Our project aims to assess the effects of quota abolition and the elimination of minimum prices on the EU sugar market. Currently, our work is focussing on the analysis of the competitive relationships between sugar and its substitute, isoglucose, on the European market. Moreover, the results of our project answers the research questions stated below. At the beginning of the project, we analyse the current situation and likely future development of the European market for sugar and isoglucose. In addition, we try to develop a basic understanding of the relationships between these two markets as well as the function and effects of the European minimum price and quota policy. Based on this analysis and in collaboration with our project partners (market experts), we develop several scenarios of quota abolition. Subsequently, we analyse these scenarios using a market model. To answer our research questions, we use a spatial price equilibrium model of the sugar sector (Nolte 2008). As a world model, it includes 118 countries at national level. Simulation results cover production and consumption position as well as bilateral trade flows with attached producer and consumer prices. In contrast to many other agricultural market models, national sugar policies (tariffs, tariff-rate-quotas, minimum prices, production quotas, consumer and producer subsidies) are explicitly modelled in great detail. Within the project, we extend and refine the model according to the aims of the project. Model adjustments, in particular, concern the implementations of isoglucose as a second product on the European market and the modeling of the competitive relationship between sugar and isoglucose. Besides that, we update the database and the policy measures of the model. As far as possible the model is based on official statistics (e.g. USDA, CEFS) and projections (e.g. OECD-FAO-Outlook, EU Commission). To improve and validate the model parameters, we use scientific publications and expert knowledge.

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Subjects

Framework programme

BMEL Frameworkprogramme 2008

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