Select Committee on Environment, Food and Rural Affairs Written Evidence

Memorandum submitted by the Country Land And Business Association (O74)

  1.  The Country Land and Business Association (CLA) represents 40,000 members who between them own and manage more than half of the rural land in England and Wales. Of our farming members many who live within the catchment area of the sugar factories are sugar beet producers.

  2.  We also recognise the wider contribution made to the rural economy both in terms of direct employment and also other business opportunities within the rural area.

  3.  We are grateful for the opportunity to submit written evidence to this Inquiry and would welcome the opportunity of further dialogue.


  4.  In the UK there are over 7,000 growers producing 1.1 million tonnes of sugar beet for British Sugar. This represents only 50% of the UK requirement, the rest being imported Cane processed by Tate and Lyle.

  5.  Environmental assessment has shown that the growing of sugar beet was beneficial for biodiversity and bird life aided by a reduction in chemical inputs over the last 20 years. Many co-products of processing are also utilised by UK agriculture.

  6.  Whilst the EU trade regime may be trade distorting it is beneficial, particularly to the Less Developed Countries.

  7.  Option 3—Liberalisation. This is potentially the most damaging option which will allow for no mitigation of damaging impacts. This option will fundamentally damage the interests of the UK, EU and LDCs.

  8.  Option 2—Reduction in EU internal price. This option would accommodate EBA agreement, however on its own would damage the industry although short term compensation through the SFP. This will not allay fears of producers over the disappearance of quotas or the process of market management.

  9.  Option 1— Stable market. Only this option gives a real opportunity to retain a viable sugar growing industry in the UK with any price cuts being compensated through the SFP.


  10.  In the UK there are over 7,000 growers of sugar beet concentrated mainly in the East Midlands, East Anglia, Yorkshire and West Midlands.

  11.  UK sugar beet production is approximately 1.1 million tonnes with a national consumption of 2.2 million tonnes the balance being made up of imported cane sugar. The industry itself is said to support more than 20,000 jobs.

  12.  Within the last 20 years there has been significant restructuring of the sugar beet processing industry with a reduction of factories from 17 to six over the last 20 years. British Sugar claims that the efficiency of the UK processing sector is the highest in Europe.

  13.  A recent environmental impact assessment carried out by DEFRA and NGOs shows that the growing of sugar beet was beneficial for biodiversity and bird life (eg pink-footed geese, stone curlew, lapwing and skylark). This is resultant from spring sowing allowing over-wintering of birds on the stubble left by the previous crop, the cover the crop provides as well as the late harvesting date which allows ideal nesting cover throughout the summer.

  14.  Over the past 20 years there has been substantial reduction in all forms of chemical inputs to the crops, in the case of insecticides by 95%. In addition many of the co-products of processing the sugar beet are better utilised many of them within the farming industry eg animal feeds.

The current regime, and worldwide concerns

  15.  The current EU sugar regime, whilst trade distorting, confers a number of benefits which we argue should be set in the balance. In particular, we point to six distinct factors which suggest that the UK sugar industry is deserving of particular care.

  16.  There are few alternative spring sown arable crops which offer over-wintering stubbles for farmland birds, and thus the protection of the sugar crop contributes to Defra biodiversity targets.

  17.  A significant sector within the rural economy benefits from the jobs and incomes that growing, transport and processing UK sugar beet provides. There are very few alternative jobs in the areas where sugar beet is produced, and job losses are hard to replace (particularly set against the background of the recent ongoing job losses in agriculture), thus maintaining UK sugar production contributes to Defra's rural economy objectives.

  18.  The transmission of cheaper bulk food commodity prices through into lower consumer prices is poor. This is because of the capacity of the highly concentrated, processing and retailing sectors that are able to capture a large share of these benefits. Thus the benefits of any reduction in tariff barriers is likely to be lower than suggested in the consultation, and will largely be transferred from farming and other rural SMEs to the shareholders of plc businesses, contrary to Treasury policy for the protection of SMEs.

  19.  Some of the poorest countries in the world in the ACP also benefit from the EU regime, to the extent that they access and enjoy protected high price markets which contribute significantly to their national economies, in line with development objectives.

  20.   The LDC's have expressed a desire for access to markets that reward at least the costs of production, rather than world trade price. They have expressed no interest in production at current world market prices, and reportedly have threatened to pass through non LDC sugar through any special access regime (such as EBA) that may be granted.

  21.  A pure open market solution benefits only the cheapest world producer, namely Brazil, where the environmental impacts of its production methods are questionable.

  22.  These factors lead us to the conclusion that, whilst concessions should be made to partially liberalise the EU sugar regime, to move too quickly, or to fail to take account of the wider benefits of UK sugar production risks significant costs, without achieving Government objectives.

  23.  We have taken the above into account in suggesting the response below.

The Options

  24.  The consultation on the reform of the sugar sector undertaken by Defra dated 21 October 2003 gives three possible orientations for the EU sugar regime:

    —  Option 1—an extension of the present regime beyond 2006.

    —  Option 2—a reduction in the EU internal price.

    —  Option 3—a complete liberalisation of the current regime.

  25.  This Defra consultation only gave a limited amount of information on the three options. The Commission Staff working paper "Reforming the EU sugar policy" and Communication "COM(2003) 554 final" gives additional information, but it also lacks a clear definition of the impact of each of these options. This makes favouring one option over another more difficult as the full facts and impacts of each option is not known. We therefore interpret the options as best we can and offer the following observations.

  26.  Where reference is made to the Single Farm Payment (SFP) the government has now made the decision that the SFP will progress from a mainly historic basis in 2005 to a purely regional average basis by 2012 although rates for national reserve and UK modulation have not yet been announced. There will two regions SDA and Non-SDA, with the sugar producing areas falling into the Non SDA region. However it is clear that under the chosen scheme any "compensation" given through the SFP for price reduction will mitigate for losses in the first few years but this benefit will be quickly lost as the payment becomes diluted across all the eligible land in the non-SDA region.

Option 1

  27.  In the context of the issues flagged above we interpret this option emphatically as not maintaining the status quo as far as price and quotas are concerned. However it does not apply as much adjustment to prices and quotas as seems to be implied by Option 2. We consider that it is necessary to retain a certain degree of regulation, control and protection of the market, within the UK, between the UK and the rest of the EU, with the ACP producers and the rest of the world. It is important that any review of the current regime sets out a long-term sustainable future for the sugar beet industry taking account of all these dimensions.

  28.  The current system does provide considerable protection for EU producers and encourages 50% of the UK sugar consumption to be met by production within this country. The regime also permits, and gives a favourable market for, an equal quantity of imported cane from certain less developed countries.

  29.  The proposal under Option 1 does not explicitly refer to any compensation to producers for reduction in price and quota. Any price cuts involved in respecting international commitments (for example on export subsidies) would therefore be a direct loss to the producer. If this was to be managed by reducing EU quotas it is also unclear as to exactly what percentage reduction would be sought from UK production.

  30.  If these changes are necessary then to be consistent with previous CAP reforms, we argue that reductions in guaranteed prices must be compensated.

  31.  If this approach is taken, and the drop in guaranteed price and quota are moderate then the UK sugar beet industry could be maintained. If the reductions are larger then this will start to force a contraction in UK sugar growing and processing. ACP countries will also suffer.

  32.  UK sugar beet producers operate large efficient well managed units with a diversity of cropping and have invested substantially in machinery showing commitment to the industry.

  33.  Option 1 is also favoured by the Least Developed Countries Brussels Sugar Group. This is the only option (save fixed quotas) that allows them to benefit from this important market.

Option 2

  34.  This option promotes reduction of the EU market price for sugar beet significantly; we understand the criterion is to reduce the internal price sufficiently to reduce domestic EU production (plus an allowance for ACP sugar) to the domestic EU utilisation, eliminating the need for any subsidised exports. In short this is the option to accommodate the EBA agreement. In the process this would remove the need for production quotas. Compensation could be paid for the reduction in price through the SFP under the CAP Reform proposals in the same way as for the other supported crops.

  35.  Whilst this proposal for reform appears to fall in line with the current EU and national government thinking on decoupled payments, if imposed as it is set out within this consultation it could have a devastating impact on the industry in the UK, the EU and the ACP countries.

  36.  The scale of price reductions, 40% has been mentioned, will lead growers to abandon sugar beet as part of their rotation. Those with aging equipment and less friable soils will cease production first followed by those who are better equipped. This would quickly have an impact on the economics of operating the current number of processing factories. There would be factory closures which then limit the choice of land managers as to the locations that beet can be grown.

  37.  The extent of the compensation likely to be offered is unclear. The precedent from the dairy reforms is that it would be much less than 100%. It therefore has to be assumed that the grower will suffer income loss, but is unclear at what scale. If no compensation under the SFP is offered then this option could well spell the end for the UK sugar beet growing sector.

  38.  The consultation suggests that price cuts would be managed to the point where the market stabilises, but does not detail the parameters against which the industry will be judged to have stabilised.

  39.  The EU has a poor record of market management at this level, and there are considerable factors that lie outside its control, not least of which is the ability under EBA of LDC countries to act as transhipment points and pass through sugar from lower cost production areas. Accordingly, whilst the EU claims that this system would carry a degree of flexibility, in reality this is significantly limited.

  40.  Moreover, any such flexibility is further limited as investment in production requires market stability. In the absence of such stability very large changes in capacity can occur at the margin, for instance should a UK sugar factory close.

  41.  It is important that those who currently are sugar beet producers are able to compete economically within the new regime. The CLA does not consider that Option 2 meets the requirement for market stability and recommends a solution based on Option 1.

Option 3

  42.  This would be the most damaging option available. The abolition of all production support and quotas will lead to a very sudden change in the sugar beet producing regime, in the UK, in the rest of the EU and in the ACP countries. If this policy is very largely motivated by a desire to help the poorest producers of sugar in Africa, the Caribbean and Pacific, then this is not the option to follow. It will simply hand a very large part of the world's sugar production and trade to Brazil and, depending on how they react, to the USA. Not only would this choice not help the worlds poor it could make things in those developing counties worse.

  43.  Even if payments were made under the SFP, Option 3 would cause many UK growers to cease production as soon as their rotations would allow them to. If no SFP was offered then no UK producer could produce economically under this option.

  44.  The environmental benefits of growing sugar beet and processing it close to its source of production are universally seen as beneficial and whilst free trade may be seen as an overall solution it could at the same time destroy a well established, highly invested, UK growing and sugar producing industry without producing any wider global benefits.

  45.  This option would devastate the economic sustainability of the sugar beet growing industry, weaken the processing industry, damage the LDCs and expand without control the production of sugar using questionable growing techniques by the advanced developing countries which could have environmentally damaging affects


  46.  The CLA recommends the option selected should:

    —  Maintain a long term economically competitive sugar beet growing sector which contributes to a sustainable agricultural industry within the UK.

    —  Maintain the existing network of sugar beet processing factories which each support a large network of producers and allied businesses.

    —  Maintain the processing of the UK sugar beet crop whilst delivering a protected import market for sugar produced from LDCs without over-exposure to competition from the advanced developing countries.

    —  Enhance the ability of land managers to make long term agricultural and marketing decisions.

  47.  Only Option 1 gives a real opportunity to retain a viable sugar growing industry in the UK, any price cuts that this option involves should be compensated. We would then expect sugar compensation payments to be integrated into the Single Farm Payment on the same basis as for other recently reformed sectors. In addition this option maintains the position of the LDCs who depend on the revenue from their sugar as an important part of their overall economy.

5 April 2004

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2004
Prepared 12 July 2004