Required Report - public distribution

**Date:** 4/5/2005

**GAIN Report Number:** EZ5006

EZ5006

**Czech Republic**

**Sugar**

**Annual Report**

**2005**

**Approved by:**

![](media/image1.wmf)Sarah Hanson

U.S. Embassy

**Prepared by:**

Petra Choteborska

**Report Highlights:**

Sugar beet production in MY 2004/05 was 554,000 MT. Average sugar
content in MY 2004/05 was 17.5% (in MY 2003/04 16%) and the average
output (tons of sugar per hectare) was 8.03 MT/ hectare. In 2004, the
Czech Republic joined the EU sugar regime, and the price of sugar
increased by over 20% after EU accession. The Czech Republic has a quota
of 454,862 MT for sugar, out of which 97% is quota A for domestic
production and 3% is quota B for export. Government officials agree with
the necessity for reforming the sugar regime, however, they do not
support the current EU proposal for cutting national quotas (A and B
combined) by 16% as it would seriously decrease domestic production, and
the Czech Republic would become a net sugar importer.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Vienna \[AU1\]

\[EZ\]

**Membership in the EU Sugar Regime**

In 2004, the Czech Republic joined the EU sugar regime. The process took
place in two stages: 1) Upon EU accession in May 2004 the Czech Republic
began applying EU tariffs on all sugar imports from non-EU member
countries; and 2) On July 1, 2004, at the beginning of the EU marketing
year, it stated using all other elements of the EU sugar regime
including use of minimum prices, intervention purchases, and export
subsidies. The Czech Republic has a quota of 454,862 MT for sugar, out
of which 97% is quota A for domestic production and 3% is quota B for
export. Government officials agree with the necessity for reforming the
sugar regime, however, they do not support the current EU proposal for
cutting national quotas (A and B counted together) by 16% as it would
seriously decrease domestic production, and the Czech Republic would
become a net sugar importer (despite that the country has good climatic
conditions for sugar beet production and has always been a sugar
exporter).

Government regulation 364/2004 on The Conditions for the Common
Organization of Sugar Markets" (known as the 'sugar act') has replaced
all previous Czech government regulations. EU Commission Regulation
1260/2001 is obligatory for all member states in the sugar regime.

## Production

Sugar production has been concentrated since the early 1990s when the
then 52 sugar refineries were consolidated into 11 companies. Of these
11, three refineries maintain 80% of the national sugar quota and are
owned by West European companies (French, French-British and Austrian).

For MY 2004/05, the total production quota of 454,862 MT was divided
among eight sugar producers:

+------------------------+--------------------+-----------------------+
| **Company              | **Refineries**     | **Individual          |
| (ownership)**          |                    | production quota**    |
+------------------------+--------------------+-----------------------+
| Cukrovary TTD          | Dobrovice,         | 168,272 MT            |
| (French-German)        |                    |                       |
|                        | Ceske Mezirici     |                       |
+------------------------+--------------------+-----------------------+
| Eastern Sugar Czech    | Nemcice,           | 102,473 MT            |
| Republic               |                    |                       |
| (French-British)       | Hrochuv Tynec,     |                       |
|                        |                    |                       |
|                        | Kojetin            |                       |
+------------------------+--------------------+-----------------------+
| Moravskoslezske        | Hrusovany,         | 86,343 MT             |
| curkrovary (Austrian)  |                    |                       |
|                        | Opava              |                       |
+------------------------+--------------------+-----------------------+
| Cukrovar Vrbatky       | Vrbatky            | 20,203 MT             |
+------------------------+--------------------+-----------------------+
| Litovelska cukrovarna  | Litovel            | 20,762 MT             |
+------------------------+--------------------+-----------------------+
| Hanacka potravinarska  | Prosenice          | 25,185 MT             |
| spol.                  |                    |                       |
+------------------------+--------------------+-----------------------+
| Manolis                | Cesky Brod, Vrdy   | 31,624 MT             |
+------------------------+--------------------+-----------------------+
| **Total**              |                    | **454,862 MT**        |
+------------------------+--------------------+-----------------------+

Sugar beets are grown on an area of around 70,000 hectares with annual
production of 510,000 MT - 560,000 MT (depending on weather conditions).
Production in MY 2004/05 was 554,000 MT. The difference between 554,000
and the production quota is exported without a subsidy.

If the EU implemented its proposed reform of the sugar regime and cut
the national quota by 16%, the Czech export quota would be zero (quota
B) and the production quota would drop by 13% (quota A). This measure
would decrease domestic production by 73,000 MT, and the Czech Republic
would become a net sugar importer. The Czech Republic has a zero quota
for production of isoglucose, therefore it does not support the EU
proposal to increase isoglucose quotas and partially replace sugar
production.

Average sugar content in MY 2004/05 was 17.5% (in MY 2003/04 16%) and
the average output (tons of sugar per hectare) was 8.03 MT/ hectare.

Sugar beet seeds are imported. One of the largest importers is Syngenta
(www.syngenta.cz).

## Stocks

According to the Commission Regulation 60/2004, the Czech Republic and
other accession countries had to report sugar stocks to the European
Commission by the end of October 2004. The Czech Republic did not have
any excess stocks, and there was no need for special measures (i.e.
exports without subsidies or use in fuel production) to deplete the
stocks.

## Prices

The price of sugar increased by over 20% after EU accession to the EU
level, which is above the EU intervention minimal price of 63.19
Euro/100 kg. Also, Act 235/2004 on value added tax came into force on
May 1, 2004, which decreased the basic level of VAT from 22% to 19% and
transferred some products and services from the decreased level to the
basic level (including all chocolate and non chocolate confectionary).

## Consumption

Sugar consumption has been stable over the last 5 years. Per capita
consumption of sugar is 41 kg, which is higher than in the EU (38.4 kg).
It is expected that consumption in the Czech Republic will not change
dramatically. However, in the long term it might decrease slightly.

(Exchange rate: April 2005: 1USD = 23 CZK)

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