This pill is NOT sugar coated - EU / CAP reform kicks in on sugar growers

The effects of the new EU sugar reform implemented in February, replacing a system unchanged for 40 years are still being felt in the UK. The guaranteed price for white sugar will be cut by 36 percent (negotiated down from 39p) over 4 years and farmers will be compensated for 64.2 percent of the price cut through a decoupled payment. The full scheme took effect on July 1st and should see a reduction in sugar costs to the consumer - who has been paying at least 3 times the world price to subsidise the sugar / sugar beet industry for 40 years.

However AB Foods (who own British Sugar) have just announced they want to purchase the UK's remaining 83,000 tonnes of sugar quota and shut its York and Allscott (near Telford) beet sugar plants at the end of this processing year 2006 / 7 , and consolidate processing at their remaining four factories in East Anglia.
They will be investing £60m in newer and more efficient plant, said Colm McKay, head of agricultural operations, not includng £20m to be invested in the Wissington biobutanol plant with Du Pont.This plant will open in February 2007 and will manufacture 55,000 tonnes (70 million litres) of bioethanol each year from sugar beet.The plant already has forward contracts to supply Greenergy who already supply Tesco who sell a 5% bioethanol petrol at 185 petrol outlets in the South East.

ABF's CEO, George Watson said “We intend ultimately to produce more sugar from four UK factories than we currently produce from six.” Last year ABF warned that the new EU sugar reform, could slice £10m (€14.4m) from operating profit in 2006-7, and some £40m per year thereafter. ABF, the fourth-largest food producer in Britain, said profit before tax and goodwill amortisation was down two per cent to £255m for the 24 weeks ended 4 March 2006. Basic earnings per share was down 16 per cent to 21.0p and profit before tax down 13 per cent to £234m.

Naturally the NFU are unhappy with change ...the closures will “change the boundaries for where sugar is grown for the factories”, adding the decision was a “kick in the teeth” to farmers.

“Sugar beet is the most profitable of the mainstream arable products and whatever farmers do instead is not going to return as much as sugar.”About 1,200 farmers in the Yorkshire area are likely to be affected by plans to shut the beet sugar factory, which employs 102 people.Alscott is a small factory but it will affect Midlands growers.

"ABF, currently the fourth-largest food producer in Britain, said profit before tax and goodwill amortisation was down two per cent to £255m for the 24 weeks ended 4 March 2006. Basic earnings per share were down 16 % to 21.0p and profit before tax down 13% to £234m.

Danisco the European producer have closed sugar factories in Assens, Denmark, Kpingebro, Sweden, Salo, Finland and the sold parts of their sugar quotas in Sweden and Finland.They estimate that their estimated earnings will drop to DKK 600-750 million a year, not including the effects of increased energy costs.

Even so EU confectioners will still be paying twice the world price for sugar. Perhaps, given rising levels of obesity at all ages we should tax consumers (as in Scandinavia), rather than subsidise producers.

See Postman Patel, Saturday, April 8 "Sweet moves by the US & UK in the Middle East" about Tate & Lyle's response to the EU / CAP changes.