Select Committee on Environment, Food and Rural Affairs Written Evidence

Memorandum submitted by David Richardson (O20)

  For the information of the committee I am (through a family partnership) a grower of sugar beet producing some 80 hectares per year. I have for many years made a special study of sugar both here in Europe and further afield and have regularly commented on it during 16 years presenting radio and TV programmes for the BBC and 13 years for ITV. I was for 10 years agricultural columnist of The Financial Times and still have a column in Farmers Weekly. My observations should be read against this background.


  There are few, if any, countries in the world where sugar can be produced at the current world price. Brazil may be one of the few exceptions but even there some financial assistance is provided to add to the intrinsic benefits of a favourable climate for sugar cane and very cheap labour. The fact that Brazil has devalued its currency by some 80% over the last few years has further placed it in a strong export position. Production of Brazilian sugar has multiplied by a factor of 10 since 1990, leading to dramatic increases in exports that are now around four times those of the EU, and this has been a significant factor in the effective collapse of the world price.


  That the EU produces more sugar than it consumes is undeniable. The greater part of this surplus is produced by a small number of member states—France produces the greatest surplus to its own requirements with Germany, Belgium, Holland and Denmark making up most of the rest. Meanwhile the UK produces only a little over half its domestic consumption, the rest being imported from African Caribbean and Pacific (ACP) countries, a few of which were French protectorates and most members of the British Commonwealth before this country joined the EEC. Other EU countries with quotas to produce less than domestic consumption include Portugal, Spain, Finland and Sweden.

  It should further be understood that while A and B quota production attracts a subsidised guaranteed price that reflects the costs of production in EU countries, so called C sugar (nominally that which is surplus) is sold at world prices without subsidy.


  In theory then the EU quota system should enable production to match consumption. Two factors militate against this. The first is politics and the historic and strategic strength of those countries that produce the greatest surpluses. The second is ongoing efficiency gains on farms and in processing plants. I would therefore argue that over production could and should be controlled by regular reduction of the quotas of those countries that contribute most to the surplus rather than by liberalising the entire regime and risking the viability of the entire EU sugar industry.


  A collapse in the EU price of sugar beet similar to that which has occurred on world markets would destroy the viability of a crop that contributes a great deal to the sustainability of European farming. In Britain alone it accounts for some 20,000 jobs on farms and in processing and packing plants. Sugar beet is an excellent rotational crop that helps to ensure plant health and avoid monoculture. It requires only about half as much nitrogen fertiliser as, say, wheat and is also economical with pesticides. The growing crop provides an ideal habitat for ground nesting birds, especially skylarks, and the RSPB regard sugar beet as a vital component in its efforts to bring about a national recovery in their numbers.


  Coffee is one of the few world commodities in which trade has been fully liberalised. In the last 10 years its retail value has doubled while its farm gate value has halved. Traditional coffee bean producers in many developing countries, for whom this is a financial disaster, have now turned to growing crops for illegal drugs in order to survive.

  Oxfam has made a detailed evaluation of the global coffee situation in its report "mugged" (Oxfam International 2002). In this study Oxfam concludes that the collapse, in 1989-90, of the International Coffee Agreement, which helped regulate world coffee prices, led directly to the current situation. It also points out that world supplies and by implication, prices, are controlled by three companies (Nestle«, Kraft and Sara Lee) which have profited at the expense of producers in developing countries. Oxfam advocates the introduction of supply controls for the global coffee market.

  Might the above become the future pattern for sugar if present proposals are adopted?


  The rationale behind the most strident demands for radical reform of the EU sugar regime is to provide markets for the Least-developed Countries (LDCs) where sugar cane is grown. It appears, however, that nobody bothered to ask representatives of those countries what they thought. When such conversations do take place it soon becomes clear that they regard liberalisation of the sugar regime with horror. I have, for instance, spoken at length to Rebecca Katowa who represents the LDCs and holds a senior position in Zambia Sugar.

  "We definitely do not want liberalisation," she told me. She went on to explain that she believed open competition for world markets would drive down the price even further. Her members could not produce sugar as cheaply as Brazil and far from benefiting from the change they could even be worse off. "What we need" she continued "is a modest guaranteed quota entitlement to supply EU markets with sugar for which we need to be paid a remunerative price". LDC countries could then make a profit on the deal and use the revenue to invest in improving the infrastructure of their countries, she concluded.

  Jean Claude Tyack from Mauritius, Secretary of the ACP Countries, asked for precisely the same thing. We cannot produce profitably at current world prices he told me. We want the present regime, which guarantees preferential access to EU markets and substantially the same price for ACP sugar as for EU sugar, to continue as far as possible the same as it has been. Liberalisation would destroy us.


  It will be clear from the above that liberalisation would be a disaster not only for the UK and EU sugar industries but also for LDCs and ACP countries. This option must be strenuously rejected. Another option that has been put forward would be to reduce the guaranteed price of sugar beet to about half its present value with a view, presumably, to eliminating inefficient growers and processors and allowing those that can operate at the lower price to survive. As a grower of many years standing I assure members of the Select Committee that while this theory may seem logical it would not work.

  The main reasons are that whereas perhaps 10% of EU growers on the relatively small area of Grade 1, or equivalent, land may (just) be able to produce at such a price in a good year, 90% could not. They would therefore be forced out of business leaving processors with insufficient critical mass to maintain factories. In other words it would amount to death by a thousand cuts and although it might take a year or two to happen the industry would still collapse just as it would under liberalisation.

  The only viable option, if a sugar industry is to be maintained in the EU, is to hold prices at levels close to those ruling at present but to accept that production quotas must be reduced, particularly in those countries producing the greatest surpluses. Production could be controlled and, seasonal variation apart, would match consumption. Capacity could be further reduced to leave room for guaranteed access for LDCs on the same terms as ACP members.

  This will take strong nerves in negotiations with some of the most powerful member states with the greatest agricultural interests. It would, however, deliver a fair deal to developing countries while maintaining a vital infrastructure around which EU and UK rural development can continue to be built. Those who reject the concept on the basis of "what we have we hold" must have it explained to them that a modest reduction in quota is better than the elimination of a vital rural industry.

25 March 2004

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