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Voluntary Report - public distribution Date: 11/7/2005 GAIN Report Number: PL5033 PL5033 Poland Sugar Poland Against Proposed Sugar Reform 2005

Approved by: Ed Porter, Agricultural Counselor U.S. Embassy Prepared by: WFM

Report Highlights: Poland's opposition to the EU’s proposed sugar regime reform may delay its’ implementation.

Includes PSD Changes: No Includes Trade Matrix: No Unscheduled Report Warsaw [PL1] [PL] GAIN Report - PL5033 Page 2 of 2

Although there is a new government in Poland, there will be no change from the previous government’s position regarding the European Commission’s proposed changes to the sugar market regime.

Poland has significant concerns about the Commission’s proposed reforms to the regime. Government of Poland (GOP) officials understand the need to reform the EU sugar regime, but believe the proposed changes are too drastic and the proposed time frame too short. They would like to see the reforms take place over a 5 year period, which would allow the industry time to adjust.

The GOP opposes the proposed changes to sugar production quotas. Specifically, the GOP opposes combining the sugar quotas into one quota because Poland’s B and C quotas were reduced prior to accession to the EU. Poland’s B and C quotas are very small compared to quotas for other member states. Poland would prefer that the quotas remain separate and that B and C quotas be reduced first, while the A quota, sugar for domestic use, would be changed only if necessary.

The GOP also opposes the proposed 39 percent reduction in the price of sugar to 385.5 Euro per ton and the proposed 42.6 percent reduction in sugar beet prices to 25.05 Euro per ton. According to GOP officials, current sugar prices are necessary to allow the Polish sugar industry to modernize so it can be competitive in the future. Prior to EU accession, incomes from sugar production were low and the sugar industry was unable to modernize and restructure production capacity. The proposed sugar beet price decrease would have a significantly adverse impact on the 72,000 sugar beet farmers in Poland. According to Mr. Kazimierz Kobza, Director of the Sugar Beet Producers Association, at a yield of 50 metric tons per hectare, it costs 40 Euro to produce one ton of sugar beets in Poland. At the proposed EU price, beet production would not be profitable.

The GOP also opposes the restructuring fund as it is proposed. Specifically, Polish officials are concerned that the centrally controlled fund will entice sugar refineries to close rather than continue to operate. Poland and 11 other countries proposed that management of the fund be the function of member state officials, rather than the Commission. It is understood that local fund management would better protect the interests of local sugar beet producers and would protect them from drastic reduction in production.

Poland wants to ensure that farmers and sugar industry workers do not bear the brunt of sugar reform. Thus, GOP officials want income compensation for farmers increased to 80 percent from the 60 percent as proposed by the Commission.

UNCLASSIFIED USDA Foreign Agricultural Service