Will new regime be a sweet deal for East Anglia’s sugar industry?
Archant Norfolk © 2015
The sugar industry has become a focal point for a key debate on post-EU food policy – should the government’s priority be free trade or protecting British farmers? CHRIS HILL reports.
East Anglia’s sugar industry faces a period of significant change, as the EU’s quota regime comes to an end amid evolving consumer tastes and commercial demand.
But the extent of the challenge ahead – along with the future viability of the sector – could well depend on the approach taken by Brexit trade negotiators.
A recent report by British Sugar outlined £250m invested during the last five years to ensure its factories are efficient and competitive, ready to ramp up production and grab a greater share of the domestic market when the European industry is de-regulated later this year.
But what if the goal-posts are moved?
Much of the debate on Britain’s post-Brexit food policy revolves around whether the government would prioritise free trade or safeguard the nation’s farmers by imposing “protectionist” import tariffs.
The industry’s confidence in its global competitiveness is tempered with concern that it could be left with a system where import barriers are abandoned, allowing “dumping” of state-subsidised, less-regulated imports from elsewhere in the world.
Paul Kenward, managing director of British Sugar, said: “The lifting of EU sugar quotas, and leaving the EU itself, offer exciting opportunities for great British businesses and industries, such as British Sugar and the wider UK beet sugar industry.
“That said, almost all countries which produce sugar domestically use tariffs and other trade protection instruments. If there was a reduction of tariffs as part of Brexit, it would leave the UK market exposed to dumping from producers whose exports are heavily subsidised, putting at risk the highly capable and competitive beet sugar supply chain here in the UK. By contrast, the UK beet sugar industry receives no subsidies, minimum prices or any other support.
“Leaving the EU gives us the chance to continue to stand on our own, competing against the rest of the world while providing a high quality, home-grown product for our domestic market.
“But British industries must be allowed to build on their successes. And providing we are not undermined by anti-competitive or distortionary behaviour, we can continue to do so.”
A decision by Tesco in March illustrated the industry’s concerns. The supermarket angered farmers by removing British-produced Silver Spoon sugar from its shelves, in favour of imported cane sugar, in a bid to “provide the best possible prices” to shoppers.
Farmers fear that if Brexit negotiators and policy-makers take a similar view – that cheap food is the more important than supporting British agriculture – it could influence the strategy on trade deals and tariffs, potentially stacking the odds against home-grown producers.
Norfolk grower Robert Hambidge said if that prompted a flood of cheap cane sugar from the Caribbean or Africa – or if rising EU production in the absence of quotas pushed beet prices down – farmers would have to think about whether to gamble on investing in machinery to grow a crop which has already been subject to low prices in recent years.
“It is certainly concentrating your mind as to what is going to happen in future,” he said. “If we knew we were going to get a deal to trade within Europe, I perhaps wouldn’t be quite so concerned. But what Tesco did is all down to fractions of pennies for what they buy their sugar at, so I am concerned that the British consumer will always seem to go for the cheaper product. That is what we are at the mercy of.
“I worry about what is going to happen in the future. The price is pretty much on the floor now – if it was much lower I would have to think about what I did. Perhaps there are other alternatives that might make me more money, and loyalty only goes so far. If you could make a profit growing oilseed rape or something else, then you would do it.”
SUGAR BOARD VIEW
Michael Sly, who farms 1,600 hectares at Thorney in east Cambridgeshire, and also chairs the National Farmers’ Union’s sugar board, believes there is a “positive outlook” for the UK sugar beet sector.
He said: “British Sugar is a competitive and efficient business and it can compete with cane coming in from other parts of the world. What may be tough is if we have cane sugar dumped on us from other markets.
“These would be the question marks, but they are questions for the government as we work through with Brexit. At the end of the day there are four factories in the East of England that support 9,500 jobs, putting millions back into the rural economy and employing some very skilled people to run these operations from farm to processor. If they were to let that go, that would be quite a decision.”
Norfolk farmer, journalist and broadcaster David Richardson said the end of quotas could bring more volatility to sugar beet prices.
“From now on, growers across Europe can plant as much sugar beet as they please – and some believe chaos will follow,” he said.
“For, although prices paid for beet are far from the heady days of the past, growers on the best land can still show a healthy profit and that includes most continental growers like those in France, Holland and Germany. But if EU production soars, as some think it will, the price paid will inevitably fall again. Further, it will also be influenced by the world price of sugar, which is notoriously volatile.
“By then Britain will, of course, be exiting from the EU and will not benefit from European guaranteed prices however inadequate they may be.
“Growers will then have to rely on the UK government and/or the world market and perhaps explore sugar futures markets which they have not had to do before.”