Economic Incentives to Supply Sugar Beets in Europe

Currently European farmers produce considerable sugar quantities above their quota in different EU member states which cannot be explained with standard profit maximizing behaviour. This paper analyses how much two alternative behavioural models - expected profit maximization and utility maximization – can contribute to explain observed sugar production. The analysis is done for an average and the distribution of sugar producers in 13 EU countries based on analytical derivations of expected profit and profit variability under the quota regulation. Despite considerable differences between countries and farms, a significant amount of C-sugar production cannot be explained by these models.