Select Committee on Environment, Food and Rural Affairs Written Evidence

Memorandum submitted by Aubourn Ltd (O58)


  Apart from actively managing 25,000 acres of farmland in the eastern counties which are growing sugar beet as part as their arable rotation, my company advises a substantial number of farmers involved in sugar beet production.


  During the last 10 years there is clear evidence to show that UK sugar beet production has not only shifted to the more efficient producer but also to the most suitable soil types for production. As a consequence of these consolidation changes considerable investment has taken place by producers in order that the most cost effective levels of production can be maintained. Collaboration and co-operation between producers to achieve the necessary cost of production has been higher within the sugar beet sector than any other. Of course this drive to efficiency is not simply focused on production, it is also relevant to the processing of beet by British sugar.

  Today the UK has one of the most efficient sugar industries in Europe; it is a vital constituent of the rotation on many arable farms and the levels of capital investment to achieve a long term sustainable enterprise is significant. As a consequence any reform of the sugar sector could have a dramatic impact on farm profitability, longer-term farm business sustainability and employment.


  As I understand it there are three clear options for reform. These are:

    —  Globalisation/liberalisation.

    —  Price reduction.

    —  Creation of a "stable" market.

  While it has been suggested that removal of all supply controls, ie quotas, would lead to an equilibrium price within the EU of circa 450 euros per tonne it seems likely that this would not be achieved. Why? Because:

    —  Firstly isoglucose production would continue to expand.

    —  Developing countries could undertake import/export swaps. That is to say they could import from the world market to supply their own domestic needs and export their own production to the EU. This activity would produce little benefit to production from developing countries as the differential between prices obtained and production costs would be minimal and they would have no other marketing opportunities. I can't see that developing countries would want to be put into this position.

    —  The result would be to drive prices down by up to 100 euros per tonne and in effect would lead to globalisation/liberalisation of the sugar sector with the potential result and consequence that both UK and EU production would cease. This would have financially and socially disastrous consequences for both stakeholders and the agricultural industry as a whole.

    —  Where other commodities have seen substantial world price reductions little benefit has been realised by the consumer. It therefore seems likely that the outcome of Option 2 would not benefit any party.

  The creation of a stable market as an option for reform involves simplification of the current arrangements and reductions in both quotas and prices. However it does assume that supply controls, in addition to price reduction, are required to achieve a stable market. This is therefore not a continuation of the status quo.


  There are a number of key elements which are essential for the continuation of a sustainable sugar sector within the UK and Europe. These can be summarised as follows:

    —  The arrangements which govern the sugar sector need to be simplified.

    —  The maintenance of supply management control through quotas for domestic EU sugar and isoglucose production is essential.

    —  There needs to be flexibility in production quotas so that overall within Europe production can be moved to better suited and more efficient areas while the overall total production is reduced to take account of external pressures.

    —  Sugar prices are reduced to take account of the EU's commitment to the world trade organisation requirements.

    —  Compensation should be paid to growers in line with how the recent CAP reform measures have been applied. This compensation should be partly coupled to take account of the interdependent relationship between growers and processors.

    —  While the contentious area of subsidised quota exports has to be addressed, it should be recognised that the UK position is one of balance between supply and demand.

    —  Changes must be phased in gradually to allow the sector time to adjust.


  Whilst I believe everyone working within the sugar sector would support the need for a reform this does need to be balanced and it does need to lead to a stable market. This will enable efficient operators within all parts of the sector to operate and invest in a sustainable manner for the future. In the UK we have invested significantly in order to achieve such high levels of efficiency and unlike other European countries our market is balanced between supply and demand. Creating a balanced and stable market will overall provide the best deal for all stake holders in the industry and in particular for producers and consumers in the UK and also for those developing countries involved in sugar production.

Philip Wynn

Managing Director

1 April 2004

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