EC MAY OFFER INTERVENTION SUGAR TO LOCAL MARKET

  Sugar which EC producers plan to sell
  into intervention may be offered by the European Commission for
  sale within the Community, broker C. Czarnikow says in its
  latest sugar review.
      The Commission will propose to offer the sugar at a very
  nominal premium of 0.01 European Currency Unit (Ecu) to the
  intervention price, with detrimental consequences for
  producers' returns, Czarnikow says. The move is seen as an
  attempt to persuade the producers to take back the surrendered
  sugar.
      The Commission may also take other steps to dissuade
  producers from their chosen course, such as removing the time
  limit on storage contracts, which presently means that
  intervention stocks have to be removed by the end of September,
  Czarnikow says. There is also the possibility of production
  quotas being reduced.
      If the Commission decided to offer the sugar to traders for
  export, the restitutions would have to be higher than those at
  recent export tenders, Czarnikow notes. To match the difference
  between the EC price and the world market price, the extra
  costs might be as much as 20 Ecus per tonne, it says.
      The producers might have to repay these costs through
  production levies and the proposed special elimination levy,
  Czarnikow says, but it would be several months before any costs
  could be recovered under EC rules.
      The primary cause of the plan to sell 775,000 tonnes of
  sugar into intervention in France is dissatisfaction with the
  EC export program as the restitution has increasingly failed to
  bridge the gap between the EC price and the world market price,
  Czarnikow notes. The French move is thus seen as a form of
  protest designed to force the Commission's hand.
      In West Germany, 79,250 tonnes have been tendered for
  intervention, but Czarnikow says the motive here is to ensure
  that the 1986/87 price is paid for sugar that was produced in
  1986. In addition to a two pct cut in the intervention price,
  West German producers face a further price reduction in July
  with a probable revaluation of the "green" mark.
      Even if the immediate crisis is resolved, the problem is
  not expected to disappear permanently. It has appeared to
  traders for some years that the EC's export policy is
  insufficiently responsive to changing patterns of demand, it
  says.
      The weekly tenders should respond to fluctuating demand by
  increasing or reducing the tonnage awarded, Czarnikow says,
  suggesting that the Commission might also take steps to cut
  down the amount of "unnecessary bureaucracy" surrounding the
  export tender system.
  

