RIGA-VILNIUS - Latvia's sugar mills will likely slash output by 10 percent over the next two years after EU agriculture ministers approved the proposed sugar reform program due to start in the second half of the year.
The Agriculture Ministry said that the sugar mills in Jelgava and Liepaja would cut production by 4,000 's 7,000 tons in 2006 's 07, according to State Secretary Aivars Lapins. The present sugar production quota set for Latvian sugar mills is 66,505 tons of sugar.
The assessment follows last week's decision by the EU Council of Ministers to reduce sugar production by some 2 's 3 million tons during the first year, though eventually the total reduction will amount to 6 million tons.
Currently sugar in the EU is heavily subsidized, with prices some three times higher than world levels. The council decided that the minimum subsidized prices should decrease by some 36 percent, and in 2009 the union will open access to its sugar market to the world's 49 poorest countries.
"I am absolutely delighted that the council has taken the courageous decision to back these long-overdue reforms," Agricultural Commissioner Mariann Fischer Boel was quoted as saying.
"The measures may appear tough, but there is no alternative. Thanks to these reforms, the EU sugar sector can look to the future with confidence. And we have sufficient funds available to help those who have to leave the sector to find alternative sources of income," she said.
Lapins said that the exact amount of sugar to be cut in both the EU and Latvia would be announced in March.
Earlier in February, Prime Minister Aigars Kalvitis said that Latvia had no reason to give up its sugar production despite the EU-wide reform. He said that large investments had been made into the industry and that local producers were competitive.
Kalvitis suggested that sugar producers themselves were interested in continuing production since the industry was highly profitable. Even if the reforms reduced profitability, profits would still remain high, the prime minister said.
Both Liepajas Cukurfabrika and Jelgavas Cukurfabrika reported in the beginning of the year that their future depended on the details of Brussels' reform program.
Meanwhile, Denmark's Danisco Sugar, which owns two sugar refineries in Lithuania (Danisco Sugar Kedainiai and Danisco Sugar Panevezys), said it would close down three plants in Northern Europe but keep operations in the Baltic state going.
Danisco said it planned to close down three sugar plants 's one in Denmark, one in Sweden and one in Finland 's at the end of this year or next year and to increase production in Germany in order to remain one of the most profitable sugar producers in Europe. The company also intends to sell some of its quotas and restructure administrative functions, as required by the EU reform.
Sales of Lithuanian-made sugar on the domestic market totaled 60,200 tons in 2005, a surge of 31.4 percent from the year-earlier figure of 45,800 tons.
Exports of sugar, meanwhile, rose by 8.1 percent, to 120,000 tons, the sugar industry association Cukrus reported earlier this year.
Rimantas Stulgys, president of Cukrus association, attributed the surge in consumption to the depleted sugar stocks of private households, which were accumulated prior to Lithuania's accession to the European Union.
Sugar output in 2005 totaled 124,700 tons, a drop of 6.1 percent from the year-earlier figure and 24.3 percent above the national quota.
In October, the European Commission reduced Lithuania's sugar output quota for 2005 by 2.6 percent, to 100,290 tons.
There are three sugar mills currently operating in Lithuania.
