Select Committee on Environment, Food and Rural Affairs Written Evidence

Memorandum submitted by the Canadian Sugar Beet Producers' Association Inc. (O30)


  We make this submission to the United Kingdom House of Commons Environment, Food & Rural Affairs Committee because we are directly affected by the operation of the European Union sugar regime. Its subsidised exports pose a threat of material injury to us. The main purpose of our submission is, however, to show that sustainable sugar beet production can occur under the option of complete liberalisation put forward as a choice by the Commission. In this scenario European sugar beet production would go through considerable adjustments. Yet it is only by dealing with the difficult agricultural commodities that the Doha Round of the WTO will succeed. Sugar is one of those commodities.


  1.  The Canadian Sugar Beet Producers' Association Inc. (CSBPA Inc.) consists solely of farmer members who produce and market sugar beet under a sugar regime which is almost completely liberalised. Therefore, we believe we are submitting comments to the House of Commons Environment, Food & Rural Affairs Committee that reflect the actual experience of farmers who have had to exist for almost 80 years producing under the conditions contemplated in the third scenario proposed by the Commission: a complete liberalisation of the current [European Union] regime.

  2.  Domestic sugar beet production for refining in Canada occurs only in the Province of Alberta. There is also sugar beet production in the Province of Ontario; however, these beets are delivered to a co-operative processor in the State of Michigan and the sugar produced remains in the United States under the American sugar programme. Comments in this paper relate to the industry in the Province of Alberta. The farmers in Ontario are not members of CSBPA Inc.

  3.  About 250 farms in the Province of Alberta annually produce between 11,000 to 15,000 hectares of beet. Sugar beet has been grown in this Province since 1923 on a continuing basis. Experiments in beet processing started earlier than this though. In 1903 the Knight Sugar Company commenced operation in our region but the factory closed permanently before the Great War.

  4.  The Canadian prairies are ideally situated for beet cultivation. This fact was reflected during World War II when beet production also commenced in the Province of Manitoba to our east. The beet factory in Winnipeg, Province of Manitoba, closed permanently after processing the 1996 crop because its primary market disappeared when the United States brought in a restrictive Tariff Rate Quota with its implementation of the WTO Agreement. The majority of the Winnipeg facility's production of refined sugar was destined for the American market. This protectionist move by the Americans resulted in the disappearance of beet production in the Province of Manitoba.

  5.  Sugar refined from beet production in the Province of Alberta supplies just under 10% of Canadian consumption. In recent years sugar production from beet has ranged from 51-114,000 metric tonnes.

  6.  The United States imposed a 10,300 tonne, raw value Tariff Rate Quota on Canadian origin refined sugar during WTO implementation. Only beet sugar refined in our factory qualifies for export. This US TRQ is far below historical access before the WTO.

  7.  Sugar was not included in either the Canada—US Free Trade Agreement nor for Canada in the North American Free Trade Agreement, reflecting the protectionist stance of the American government respecting the competitive threat posed by the efficient Canadian sugar refining industry.

  8.  The maximum tariff in Canada for refined sugar is CDN $30.86 per tonne or approximately 8% at present values. The raw sugar tariff is 0%. About 90% of the Canadian market is served by imported raw or refined sugar.

  9.  Antidumping and countervailing duties exist on dumped or subsidised refined sugar from the United States and some members of the European Union.

  10.  The Canadian sugar market reflects the world price of raw sugar plus freight and related costs and margins.


  11.  The Environment, Food and Rural Affairs Committee has Terms of Reference to "consider the options for the forthcoming reform of the EU sugar regime, and make recommendations about the position of the United Kingdom in negotiations about the stance the European Union should adopt over the reform".

  12.  The three options put out by the Commission are:

    —  An extension of the present regime beyond 2006.

    —  A reduction in the European Union internal price.

    —  A complete liberalisation of the current regime.

  13.  CSBPA Inc advocates the last option, complete liberalisation of the current regime.


  14.  The Canadian sugar beet industry is located in the Province of Alberta where it is the most cost competitive and furthest removed from tide water and competing cane sugar refineries. Beet has been in production without interruption since 1923, except for 1985 when production did not happen because of a contract dispute between farmers and the processor. A comparative advantage exists because of transportation costs versus competing sugar suppliers and an infrastructure to service the prairie region market.

  15.   "Canada is the sole sugar-producing country in which domestic sugar prices have long been aligned closely to world market prices." 15 Since the 1995 crop, when farmers voted unanimously to have the federal and Province of Alberta governments withdraw commodity-specific price support for sugar beet, production has been on an entirely decoupled basis.

  16.  Production of beet initially rose after price support was abandoned. In 1995 there were 13,724 hectares of beet planted. This rose to 18,102 hectares in 1999 after a 50% capacity expansion of the sugar beet factory. By the 2003 crop, seeded hectares dropped to 11,263. It is expected planted hectares will recover to about 13,000 for 2004.

  17.  During the last 10 years of sugar beet price support in Alberta, the program funded by one-third premium contributions from the federal and provincial governments and the farmer provided a sharply decreasing level of revenue to the farmer, as Table 1 demonstrates.

Table 1


198619871988 19891990 199119921993 19941995
Market Price21.8330.52 37.3345.1940.86 32.1038.1938.83 43.0243.70
Deficiency Payment17.42 14.743.830.00 1.422.280.00

  18.  A crop insurance program to protect farmers against weather hazards continues. This program is jointly funded by government and sugar beet farmer premiums. As a low risk crop, pay-outs on crop insurance policies are less than premium payments in most years. The plan runs at a substantial premium surplus.

  19.  Hectares devoted to sugar beet declined from 2000-02 because of engineering problems in the expanded sugar beet factory, drought or the threat of drought in two seasons, and cold weather in another one. These factors worked to reduce yield or beet quality, thereby lowering revenue substantially, as well as farmer morale.

  20.  Despite the disappointments of recent years due to a number of causes, in 2003 all factors combined to produce a reasonable quality sugar beet crop at a tonnage per hectare about 10% above the expected yield.

  21.  Sugar beet production is expected to continue in the longer term in Canada. This is because of the commercial terms of the contract between the farmer and the processor.

  22.  The crop is grown in a four year rotation with grains, dry beans, sweet corn, potatoes, and forages being common alternatives in the three other years of the rotation. None of the other crops in the rotation have crop-specific price support.

  23.  Cross subsidisation due to government support programs is not a factor in sugar beet farming in the Province of Alberta.

  24.  Only one family of sugar beet farmers in the Province of Alberta is also involved in producing a product under the Canadian system of supply management.

  25.  Export of Tariff Rate Quota refined sugar to the United States is not supported by export subsidies.


  26.  Sustainable sugar beet production is possible under a policy of complete liberalisation. Production will, however, be adjusted to an area where comparative advantage exists.

  27.  The world sugar market is unsustainable because of restricted market access, distorting domestic support schemes, and export subsidies. Developed and developing countries without domestic support schemes or export subsidies are materially injured by the present state of the market.

  28.  Special and differential treatment will need to be afforded to certain sugar-producing countries during a transitional phase because of the huge distortions in the international sugar market. The topic of sugar should be made a special priority going into the Hongkong Ministerial of the WTO similarly to the way cotton was given attention at the Cancun Ministerial. By focusing on commodities most affected by trade impacts, the WTO may actually develop practical means of defining special and differential treatment.

  29.  Only the WTO can fully deal with the problems facing sugar. Regional and bilateral efforts may bite away at the edges but the full package addressing market access, trade-distorting domestic support, and export subsidies is possible only at the WTO.

26 March 2004

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