Tate & Lyle secures seven year supply with Fiji

By Laura Crowley

- Last updated on GMT

Related tags Sugar European union

Ingredients firm Tate & Lyle has entered an agreement with Fiji
Sugar Corporation for the supply of 300,000 tonnes of raw sugar per
year till 2015, amid developments in the EU sugar regime.

The deal will be governed by the terms of the Economic Partnership Agreement (EPA) between Fiji and the European Union, which will come into place next year.

Under this agreement, Fiji and Europe have decided on preferential imports - meaning the importing country does not need to pay full import duty.

"This is another significant step towards meeting our strategic supply objectives," said Ian Bacon, chief executive of Tate & Lyle.

Ferne Hudson, head of media, told FoodNavigator.com: "Our strategic supply objective is to take advantage of the growing level of cane sugar imports into the EU as a result of recent changes to the EU sugar market."

Partnership between EU and Fiji Tate & Lyle has had a long-standing supply partnership with Fiji Sugar Corporation, which has existed since the start of the Sugar Protocol between Africa, the Caribbean and the Pacific and the EU.

This guarantees access to the EU market for fixed amounts of sugar from the three areas, at preferential prices over an indefinite amount of time.

This will come to an end on 30 September 2009, and will be replaced by the EPA.

At a seminar hosted by Danish company Danisco last week, Commissioner Mariann Fischer Boel explained the direction of the new agreement.

She said: "Under these agreements, we are moving towards quota-free, duty-free sugar imports from all 76 of these countries, governed by a safeguard clause which will limit the potential imports involved to about 3.5 million tonnes per year until 2015.

"The essential point to understand is that these imports have been taken into account in our sugar sector reform.

Even if they occur at the full level, they should not destabilise our market."

The new policy is included in the EU's sugar reform regime, which aims to improve competitiveness and market-orientation of the EU sugar sector and guarantee its long term future.

Under the programme, financial incentives have been offered to the less competitive producers to leave the market.

According to Fijilive, the sugar and finance minister Mahendra Chaudhry said the challenges arising from changes under the reform and the new EPA "required the sugar industry to seek long-term commercial arrangements, which would contribute positively to the continued viability and sustainability of the industry" .

He added though that they would "ensure that Fiji was able to take full advantage of the additional market access opportunities for sugar in the EU as well as benefit under its long term contract with Tate & Lyle" .

Meanwhile, Bacon from Tate & Lyle described the deal as a "positive move" for the company, and said it follows recent developments to its business, such as the switch of the UK retail brand to Fairtrade, investment in renewable energy technology at its Thames refinery, and investments in Laos and Italy.

Effects of sugar reforms Fischer Boel said last week that 5.65m tonnes out of the 6m tonnes target have now been given up, leaving just 350,000 tonnes short.

Companies with sugar operations have been reconsidering their business direction, and in some cases focusing their resources elsewhere, Danish firm Danisco is currently preparing to spin off its sugar division as a separate company or to sell it by the end of 2008, in order to ensure the best future development opportunities for both areas of activity, while giving shareholders the choice on whether to back sugar or ingredients.

Danisco had originally planned the move for 2010, to allow time for the fall-out from the reform process to settle.

However in March it decided to bring it forward as the outlook for the industry started to look rosier.

Similarly, Spain's Ebro said last week that it is also considering a sale or spin off of its sugar operations.

"This proposal to study an operation of this nature is considered convenient at a time when the viability and stability of the sugar business has been guaranteed for forthcoming years, after satisfactory completion of the Sugar CMO ," said Ebro in an announcement to shareholders.

It is looking at completing the operations within 24 months.

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