Südzucker, as the largest sugar producer in Europe and a significant producer of ethanol, is particularly impacted by the free trade agreement between the EU and the five Mercosur countries – since Brazil is the world's largest sugar producer.

In response to an inquiry, the company informed Börsen-Zeitung that a tariff quota of 190,000 tons of refined sugar from Mercosur countries has been established. The majority of this, 180,000 tons, will come from Brazil, with 10,000 tons allocated to Paraguay. „This amount is roughly equivalent to the production volume of a European sugar factory“, said a Südzucker spokesperson. While this may not seem particularly significant at first glance, it is expected to put further pressure on sugar prices in Europe.

In Südzucker's latest interim report on the European market, the company states that the EU Commission expects production to increase to 16.1 million tons for the concluded 2023/24 sugar business year (ending September 30), up from 15.0 million tons the previous year. However, analysts anticipate a decrease in consumption compared to the previous year. This development naturally puts pressure on sugar prices, which is negative for producers. The situation could worsen in the current sugar year, as the EU Commission expects production to rise further to 16.9 million tons. According to Südzucker, the company produced 4.1 million tons of sugar in 2023/24 (compared to 3.7 million tons the previous year), accounting for about a quarter of EU production.

Due to oversupply, several sugar factories in Europe have already closed in recent years. Südzucker, based in Mannheim, has also shut down factories, including those in Warburg and Brottewitz. In the 2023/24 fiscal year, the company still operated 23 sugar factories, seven of which were in Germany.

The second-largest sugar producer in Europe is Nordzucker, which, unlike Südzucker, is not publicly listed. The Braunschweig-based company produced 2.6 million tons of sugar from beets and 0.7 million tons from cane in the 2023/24 fiscal year.

In Europe, sugar is exclusively derived from sugar beets, while in other parts of the world – including Brazil – it is derived from sugar cane, as the tropical climate is ideal for its cultivation. In 2019, Nordzucker acquired a majority stake in Australia's second-largest sugar producer, Mackay Sugar Ltd. (MSL), which explains its production share from sugar cane.

The second area affected by the EU-Mercosur agreement is ethanol. In Germany, Südzucker's subsidiary Cropenergies which was delisted at the end of February this year, Nordzucker, and Verbio are among the producers of bioethanol, which is primarily derived from grains and sugar products. Last year, the consumption of bioethanol in Germany rose by 5% to 1.25 million tons. It is primarily used as fuel for cars and other vehicles, mainly in „E10.“

Ethanol, which is broader in scope than bioethanol, is often used as a solvent for substances used in medical or cosmetic applications, or as a disinfectant. Südzucker reports that a tariff quota of 650,000 tons of ethanol from Mercosur countries is planned. This is made up of 200,000 tonnes for all uses (including fuel) with a quota rate of one third of the Most-Favoured-Nation rate and 450,000 tonnes of ethanol for chemical uses. According to the US Department of Agriculture, around 6.3 billion litres of ethanol were consumed in the EU in 2023.

In a joint press release, eight European agricultural associations, including the European Association of Sugar Manufacturers (CEFS) and the European Industrial & Beverage Ethanol Association (iEthanol), pointed out at the end of November that there are significant differences in production and environmental standards in agriculture/agribusiness between the EU and Mercosur countries. They argue that these discrepancies contradict the EU's goals concerning food security, sustainability, and consumer protection.

From today's perspective, the EU-Mercosur agreement will exacerbate unfair competition, warned Massimiliano Giansanti, president of Copa, a European agricultural umbrella organization (the umbrella group of farming associations). Guillaume Gauthier, president of the Sustainable European Livestock & Meat Association (Selma), called for the EU to ensure that imported products meet the same standards required of European manufacturers. Reciprocity in standards is a non-negotiable element of the agreement.

This principle should be a cornerstone of all trade agreements and policies, the statement reads. Without provisions ensuring that imported products meet the same hygiene, health, environmental, and animal welfare standards required of European entities, the profitability of agricultural production and agribusiness in the EU will decrease.