Memorandum submitted by National Farmers'
Union
EXECUTIVE SUMMARY
The following should be read in conjunction
with the NFU's full submission.
Price cuts
The NFU regards the proposed price reduction
of 42.6% as unnecessarily severe. Price cuts should be limited
to what is necessary to drive the Restructuring Scheme and achieve
the required reduction in European production.
Additional price cuts
A combination of additional price cuts and factors
not taken into consideration by Commission calculations will effectively
mean that UK growers could face a price cut of approximately 54%.
Quota
The NFU is opposed to compulsory quota cuts
and welcomes the Commission's intention to use a combination of
price cuts and a voluntary restructuring scheme to achieve market
equilibrium instead.
Quota ownership
The NFU is disappointed that in both of its
proposals for the Restructuring Scheme and quota buy-back, the
Commission has neglected the legitimate rights and interests of
growers by failing to provide an adequate role for growers in
the decision making process.
Implications for UK agriculture
The effects of the proposed reform would include
a material reduction in the area of beet grown in the UK, a reduction
in the number of holdings on which sugar beet is grown and increased
risk of factory closure. The loss of the crop on holdings will
have a direct impact on the level of labour that the farm is able
to support, and so lead to further job losses.
Decoupling
Compensation should be decoupled from production.
Any scope for Member States to allow partial coupling would encourage
less efficient producers to remain in beet production, thereby
hindering the objective of achieving an efficient and viable EU
industry in the longer term and disadvantaging UK growers.
Compensation
The Commission's proposed flexibility over distribution
of compensation would lead to unfair competitive distortions.
The UK's compensation effectively represents 53% of the real price
reduction (following the final price cut in 2007), not the 60%
headline figure in the Commission proposals. These uncompensated
elements should be incorporated into the national compensation
envelopes.
Contractual arrangements
Assuming a reform is agreed that does not discriminate
against the UK, future viability and profitability still depends
on viable new commercial arrangements between growers and processor.
Working with growers, the NFU Sugar Board is developing a vision
for the future that will require a commitment to real partnership
from British Sugar/ABF Plc.
Government must also recognise the stake that
it holds within the industry, and do what it can to help processor
and grower secure a robust commercial partnership.
INTRODUCTION
The National Farmers' Union of England and Wales
(NFU) is recognised in legislation as being the body substantially
representative of the producers of sugar beet in the UK. As such,
it negotiates on behalf of all UK sugar beet producers and welcomes
the opportunity to provide evidence on the reform in the EU sugar
sector.
1. EXTENT AND
TIMESCALE OF
THE PROPOSED
PRICE REDUCTIONS
Extent of price cuts and method(s) for achieving
market equilibrium
1.1 The NFU concedes that the EU is bound
to implement a cut in price in order to satisfy a combination
of internal and external pressures. Furthermore, the NFU acknowledges
the need to achieve a balance in the market between EU production
and imports on the one hand and domestic consumption and exports
on the other.
1.2 The NFU welcomes the fact that the Commission
has proposed no compulsory quota cuts. The necessary adjustment
in the volume of European production will be achieved by a combination
of price cuts and a voluntary restructuring scheme.
1.3 The level of price cuts should be carefully
balanced. The reduction should be limited to what is necessary
to drive the Restructuring Scheme and achieve the required reduction
in European production, but allow profitable beet production to
continue to be viable in the most efficient regions.
1.4 We feel that a headline price reduction
of 42.6% is unnecessarily severe in attempting to achieve these
aims and will jeopardise beet production in even the most efficient
EU Member States, including the UK.
Additional price cuts
1.5 A headline reduction in the Minimum
Beet Price of 42.6% over two years does not begin to tell the
real story of the kind of price cuts that UK growers are likely
to face. A combination of additional price cuts and factors not
taken into consideration by Commission calculations will effectively
mean that UK growers could face a price cut of approximately 54%
(see Appendix 1 for summary). The additional cuts are described
below.
Production Levy (applicable to all Member States)
1.6 The stipulation that 50% of the "Production
Charge" can be charged to the growers (Article 16) equates
to a further price reduction of €0.78/t beet, or a Minimum
Beet Price of €24.27 (an additional price reduction of 1.7%).
In the current regulation, the production levy was introduced
to finance the cost of the sale of quota sugar in excess of Community
production. Following reform, however, production under quota
to be sold on the Community market will always be lower than consumption
because imports will significantly exceed exports of quota sugar.
The Production Charge is therefore unjustified and should be removed
altogether.
Flexibility Clause (applicable to all Member States)
1.7 The "flexibility clause" (section
2.2 of Explanatory Memorandum) allows for a further 10% reduction
in the Minimum Beet Price to be negotiated if the EU market price
drops below the reference price. The NFU understands that the
rationale for this clause is to enable factories to remain viable
in times of adverse market price conditions. However, not only
does this contradict the very notion of a minimum price, and put
further pressure on growers' margins, it is also asymmetrical
in its implementation. If growers are to help keep factories viable
when the market price is lower than the reference price, they
should be given the opportunity to benefit from a share in the
extra margin when the market price is higher than the reference
price. This inequity is symptomatic of the imbalance that has
arisen in the grower-processor relationship over time. Activation
of the flexibility clause would see the beet price reduced to
€21.84/t (including the "production charge"), representing
an overall price reduction of 50%.
Loss of Deficit Area Premium (specific to some
Member States, including UK)
1.8 The UK status as a deficit area producer—approximately
50% of sugar for domestic consumption is imported from African,
Caribbean and Pacific (ACP) producing countries—has meant
that growers have benefited from an additional €1.90/t of
beet produced. While the NFU accepts that this status may no longer
be applicable post-reform, we believe that the existence of the
deficit area premium should be taken into account in the Commission's
calculations and its removal compensated for in the UK national
compensation envelope (see part 4 on compensation for more detail).
Merging of "A" and "B" Quota
(specific to some Member States, including UK)
1.9 The notion of implementing the 42.6%
price cut on an amalgamated A+B quota discriminates against Member
States with proportionally smaller B quota; these Member States,
including the UK, will effectively face a greater percentage price
reduction. It is crucial to note that this is not due to any kind
of preferential treatment; UK growers face the same Minimum Beet
Price as growers from all other Member States. Rather, the discrimination
is a result of the differing A and B beet prices caused by the
higher levy paid on B beet. In their pursuit to simplify the quota
system, the Commission have unfortunately failed to take into
consideration the discriminatory effect this will have across
the EU.
1.10 As a result of the proposed method,
UK growers are likely to face an effective price cut of 2.3% over
and above the 42.6% proposed by the Commission. UK growers must
not be discriminated against, and the NFU disagrees with the notion
of cutting prices on an amalgamated A+B quota. The Commission
should devise an alternative solution that is equitable, taking
into account the differing proportion of A and B quota across
the EU.
SUMMARY
1.11 The combination of these factors would
mean that the UK neither starts at a price of €43.63/t beet,
nor finishes up with a post-reform price of €25.05/t beet.
Taking into account the UK's proportionally smaller B quota and
including the deficit area premium means that the UK actually
starts at a theoretical price of €47/t beet.[4]
[5]
1.12 At the other end, implementation of
the Production Charge will bring the Minimum Beet Price down to
just €24.27/t. For the UK, this represents a minimum total
effective price reduction of:
((24.27 / 47.00) x 100)-100 = 48.4%
If the "flexibility clause" is implemented,
the Minimum Beet Price could be reduced to just €21.84/t,
representing a maximum total effective price reduction for the
UK of:
((21.84 / 47.00) x 100)-100 = 53.5%
Timescale
1.13 The NFU's view on the time needed to
implement the price cuts is largely dependent upon the final shape
of reform compromise. Under the current state of play, the need
to reduce prices in a relatively short period of time seems evident.
2. EXTENT TO
WHICH THE
PROPOSED REDUCTIONS
IN PRICE
WILL BE
TRANSMITTED TO
THE CONSUMER
2.1 It is widely held within the sugar,
and subsidiary industries, that the consumer is likely to see
little benefit from the reform of the EU sugar industry. While
the price of sugar will be substantially reduced and consumers
are likely to be able to buy cheaper sugar from supermarkets,
the majority of sugar consumed in the EU/UK is in the form of
processed food products. Historical evidence suggests that sugar
users are unlikely in the first instance to pass on the cost savings
to their customers, instead pocketing the difference to increase
their own margins. In the longer term, the extent to which price
cuts will be passed on to customers will depend on the degree
of competition in the food chain.
2.2 Given that most sugar is consumed in
processed products, where the share of the total product price
is trivial, and it is uncertain whether even this reduction would
be passed on, it seems very unlikely that this reform will have
any discernible impact on sugar consumption.
3. THE IMPLICATIONS
FOR UK AGRICULTURE,
WITH PARTICULAR
REGARD TO
POSSIBLE ALTERNATIVE
LAND USES
3.1 The NFU has carried extensive consultations
with beet growers, and the views put forward in evidence below
are those of UK sugar beet growers, and represent all parts of
the sector.
3.2 The substantial reduction in price proposed
will lead to a reduction in the numbers of farm holdings growing
beet in the UK. The decision to continue or withdraw from production
will be taken at farm level but there will be a number of common
critical considerations:
— Soil type, impact on rotation and
available alternative cropping.
— Distance to processing factory.
— Access to modern planting, harvesting
and loading equipment.
— Scale of farm business.
3.3 Until the net beet price available to
UK growers is fixed, and negotiations about detailed contractual
issues concluded, there are too many unknown variables to support
valid sensitivity analysis, either at industry or farm level.
It is interesting to note however, that the Impact Assessment
produced by the EU stated that "break-even" beet price
for UK growers was €40 per tonne; the subsequent conclusion
that the UK beet industry could operate within the "safe
zone" post reform appears to be based on the assumption that
processor and grower will work together to secure additional efficiency
savings, and that these would be shared between both parties.
3.4 It is clear to the NFU, however, that
the reforms will lead to:
(a) A material reduction in the area (hectares)
of beet grown in the UK; the current contract penalises growers
that fail to meet their contract tonnage in two out of any three
years by cutting the subsequent tonnage in future contract offers.
Due to substantial variations in yield and sugar content resulting
from different climactic and harvesting conditions, this practice
has led to growers planting an additional area of crop for "insurance
purposes". British Sugar has sold production from this area,
together with any additional tonnage over A&B contract levels
into the "C sugar" market. This practice can no longer
continue; the C sugar market no longer exists, and growers simply
cannot afford to plant and grow crops that will not attract the
market price.
3.5 Analysis by Savills Research[6]
shows that beet production has been over quota by on average 17-18%
over the last 10 years, varying from 7% to 28%. Over the last
five years, the crop area has tended to decrease; main fluctuations
are due to yield and the sugar quantities in the beet. Savills
has calculated that the area of crop needed to meet quota based
on the historic 10 year average yield of 53.3 t/ha would be nearly
20% lower than in recent years.
3.6 The NFU will be involved in negotiations
with British Sugar to find ways of better matching volume of sugar
beet supply to tonnage of sugar quota.
3.7 (b) A reduction in the number of
holdings on which sugar beet is grown. It is inevitable that some
growers will find it impossible to supply sugar beet profitably
to British Sugar under the terms of a new contract (yet to be
determined). These businesses will include those for whom alternate
cropping is a viable option, some for whom mono-culture becomes
inevitable, and some for whom the only alternate is not to cultivate
the land.
3.8 (c) An Increased Risk of Factory
Closure; the impact on the processor is to be considered in a
later question. It appears however that British Sugar do not plan
to enter into the Restructuring Scheme; any subsequent factory
closure will therefore not attract any EU restructuring payment
as it stands.
3.9 Sugar beet is an important crop for
many holdings. It is relatively high output but labour intensive;
it therefore supports labour costs across the remainder of the
farm business. It is also a valuable spring sown break crop and
offers substantial environmental benefits. [7]Its
use as part of a viable rotation is of crucial importance on many
sugar beet growing farms, where soil type makes the use of alternates
such as oilseed rape, pulses and brassicas unviable or impossible.
3.10 The loss of the crop on many holdings
will have a direct impact on the level of labour that the farm
is able to support, and so lead to further job losses. Many holdings
are reaching a point where they are operating with the absolute
minimum of labour; this inevitably means that the ancillary work
to manage and maintain the landscape upon which the UK has become
so reliant, cannot be carried out.
3.11 It is inevitable, that in many instances
where Sugar Beet is removed from the rotation, it will be replaced
with a crop that offers fewer environmental benefits, increases
the level of mono-culture and so directly affects biodiversity
and countryside quality.
3.12 Brooms Barn Research Organisation has
produced a paper looking at the environmental impacts of sugar
regime reform. [8]
3.13 For a material proportion of growers,
these alternate crops are also likely to produce a lower margin,
and so erode further the profitability and viability of the business,
not to mention the volatile effect this may have on the market
balance of these alternative crops.
4. THE PROPOSED
ARRANGEMENTS FOR
COMPENSATING EU PRODUCERS
Decoupling
4.1 The NFU agrees that compensation should
be decoupled from production. It is our strongly held view that
this should be applicable to all Member States without delay.
This is the Commission's proposal, but we see a serious risk that—as
happened in June 2003—in order to obtain a majority in the
Council of Ministers there will be a compromise introducing the
option of "partial" decoupling. This must be avoided
at all costs. Any form of coupling will encourage less efficient
producers to remain in beet production, thereby hindering the
objective of achieving an efficient and viable EU industry in
the longer term.
Level of compensation
4.2 Whether the level of compensation is
acceptable will depend heavily on how compensation is to be administered,
given that the Commission have allowed Member State flexibility
over the right to distribute sugar beet compensation.
4.3 Having said this however, what is apparent
is that the Commission's headline compensation falls short of
the 60% aim if the "real" price cut is taken into account.
There are two aspects to this view. Firstly, that as a "deficit
area" producer, UK growers are paid an additional €1.90/t
quota beet. Secondly, implementation of the Production Charge
to growers will reduce the Minimum Beet Price by a further €0.78/t
beet to €24.27/t. While the first is specific to the UK and
other deficit area Member States and the second is a valid concern
for all Member States in beet production, both elements are omitted
from the Commission's calculation for the national compensation
envelopes, therefore are "uncompensated". In appendix
2 we show that in light of these factors, the UK compensation
envelope effectively represents approximately 53% of the real
price reduction (following the final price cut in 2007), not the
60% headline figure in the Commission proposals.
4.4 It is the NFU's view that these so far
uncompensated elements should be incorporated into the national
compensation envelopes as they reflect the actual price reduction
to be implemented, but without a reduction in the percentage commitment
of 60%.
Single Payment Scheme
4.5 We agree that compensation for sugar
reform should be incorporated into the SPS, [9]but
in practice this will make no difference in terms of cross-compliance.
There is no such thing as a farmer who solely grows sugar beet.
All growers would have been growing other arable crops that make
them eligible for the SFP. In practice, therefore, sugar beet
land is already subject to the full range of cross-compliance
conditions.
Reference period
4.6 The NFU is satisfied with the flexibility
that allows each Member State to choose the reference period for
compensation to be paid. Historical circumstances in each Member
State will differ. In the UK for example, 2000-02 would not be
a suitable reference period due to the 2001 Outgoers Scheme. The
NFU would support the most recent reference period possible (without
incorporating any future years) as being the most appropriate
means of reflecting current industry.
Administration of compensation
4.7 The Commission have offered Member States
the flexibility to choose how compensation is administered nationally.
Such flexibility will undoubtedly create competitive distortion
among Member States with beet growers receiving historic compensation
being placed theoretically in a better position to make efficiency
gains and reinvest in the industry than those receiving regional
compensation.
4.8 While the NFU believes that the optimal
method would be to avoid any potential distortion altogether by
ensuring compensation is paid consistently across the EU, we are
mindful that flexibility will likely be retained and that the
UK Government may favour a transitional hybrid compensation system
that will ultimately lead to fully regional compensation.
4.9 Considering these circumstances, the
NFU is actively exploring all possible options and outcomes with
the aim of establishing a set of principles that will provide
UK growers with maximum benefit for as long as possible and avoid
being disadvantaged in comparison to our closest competitive rivals.
The NFU would welcome the opportunity to discuss these principles
with the UK Government at an appropriate time.
4.10 It is the view of the NFU that compensation
should be distributed on the basis of (contracted) tonnage as
opposed to beet area. This will benefit growers with higher yields.
5. THE CHANGES
TO THE
QUOTA ARRANGEMENTS
Amalgamation of A and B quotas
5.1 The Commission's proposal to simplify
the quota system by merging "A" and "B" quota
into a new single quota and then cutting price causes disparity
among Member States due to the differing proportion of A to B
quota that each Member State holds.
5.2 The price growers receive for A beet
is higher than the price received for B beet due to the higher
levy charged on B (approx. 38%) than A (approx 2%) beet. Coupled
with a differing proportion of A to B beet across the Member States,
this results in a different amalgamated or average price.
5.3 The NFU therefore opposes the notion
of implementing price cuts on an amalgamated A+B quota on the
basis that it disadvantages Member States with proportionally
smaller B quotas. The Commission should devise an alternative
solution that is both fair and equitable, taking into account
the differing proportion of A and B quota across the EU.
Restructuring Scheme
5.4 The NFU acknowledges the need to reduce
EU production in order to help achieve a long-term market balance
and to meet our WTO obligations. The NFU agrees with the principle
of a Restructuring Scheme as opposed to indiscriminate mandatory
across-the-board quota cuts in order to achieve this aim.
5.5 In a more liberal world trading environment,
there can be no long term future for European sugar production
unless it is more competitive. Production must be allowed to gravitate
to the most productive regions, and not artificially maintained
across the whole of Europe by a quota system.
5.6 We support the offer of degressive aid
over a four-year period that will hopefully encourage the least
efficient regions in the EU to relinquish production gracefully,
and sooner rather than later.
Purchase of additional quota
5.7 The NFU also agrees, in principle, with
the provision to allow the most efficient Member States the opportunity
to purchase a proportion of 1 m/t of additional quota, of which
the UK "share" is 82,847 tonnes. Given a fair and balanced
reform, we are confident that the UK beet industry has the ingredients
to continue to prosper into the future and should therefore be
given the ability to expand.
Quota ownership
5.8 The NFU has serious reservations over
the detailed workings of both schemes. The Commission has neglected
the legitimate rights and interests of growers by failing to provide
an adequate role for growers in the decision making process involved
in relinquishing quota under the Restructuring Scheme, and expanding
quota under the additional quota purchase scheme.
5.9 Just as the issue of "quota ownership"
had been central to the proposed mechanism to transfer quotas
across national borders, the NFU believe the issue remains pivotal
in the decision to relinquish and/or expand quota. We are concerned
that the lack of a balanced approach to such a central issue as
restructuring may have serious consequences for the issue of quota
ownership.
5.10 The position in the UK is that the
national Sugar Quota is held by the Government as custodian on
behalf of the country, and made available to the sugar processor
in order to provide access to the EU Sugar Regime for growers
and processor.
5.11 How is this position to be maintained
with regard to the additional 82,847 tonnes of sugar quota available
for purchase by the UK? Will the Government acquire this tonnage
on behalf of the industry, without seeking to recover any of the
cost of acquisition from the processor or grower? If not, on what
basis will a contribution be sought from processor and/or grower?
If money changes hands, what impact does this have on the ownership
of the additional quota? Would processor or growers have any rights
in respect of this Quota, how would it be dealt with in respect
of future cuts in quota imposed by the EU?
5.12 All these questions remain unanswered.
It is imperative that the UK government enters into this debate
as an active party, as custodian of the national sugar quota,
and does not permit the tripartite relationship between Member
State, grower and processor to be fundamentally altered or undermined.
5.13 The Commission and Member States need
to address the issue of ownership more explicitly and recognise
the legitimate interests of growers.
6. THE POTENTIAL
IMPACT OF
THE REFORMS
ON UK-BASED
SUGAR BEET
PROCESSORS AND
CANE REFINERS,
AND THE
LONG-TERM
CONSEQUENCES FOR
THEIR INDUSTRIES
6.1 The UK processor is on record[10]
that it expects the operating profit impact to be some £10
million in 2006-07 and some £40 million in 2007-08 and thereafter.
It is also on record that it expects "these effects to be
in part mitigated by cost reductions". It is inevitable that
these cost reductions will be focused in two areas; efficiency
savings within processing and administration, and contractual
arrangements (of which headline price for sugar beet is one of
many complex elements) with its supplier base.
Processing Efficiency Savings
6.2 The NFU and growers have worked in partnership
with British Sugar to extract maximum possible efficiency savings
from plant and process. The NFU works closely with the processor
to optimise communications with the 7,000 growers and minimise
administration costs related to the annual contract cycle. The
NFU and growers are not however, full partners in the processing
of sugar beet, and have limited influence in decisions taken in
that regard.
6.3 The NFU fully expects British Sugar
to seek further savings within process and administration, and
a factory closure cannot be ruled out as part of any cost mitigation
strategy. British Sugar currently operates at six factories having
closed sites at regular intervals in the last decade.
6.4 The Government has stated on record[11]
that it believes that factory closures `are not a new phenomenon
in the sugar sector' and that `those are commercial decisions
for the company'.
6.5 If this is the government's position,
it should consider that previous closures have led to consolidation
of supply, with growers offered the right to supply an alternate
factory. Any dis-enfranchisement of growers in the event of future
factory closure would be inequitable; even more so when the processor
may have unilaterally rejected an EU Restructuring Scheme that
provides for compensation for growers forced out of production
by factory closure.
Cost Savings via Contractual Arrangements with
Supplier Base
6.6 The UK sugar beet industry has three
key elements; the sugar quota holder (government as Member State);
the processor (British Sugar a wholly owned subsidiary of Associated
British Foods Plc, the international food, ingredients and retail
group); and the growers, 7,000 individual farm businesses.
6.7 The relationship between processor and
supplier of raw material (sugar beet) is inherently unbalanced.
6.8 In an effort to level this playing field,
the supplier base is represented by the NFU Sugar Board, which
carries out all negotiations and interaction with the processor
on the growers' behalf, acting as agent. The Sugar Board consists
of elected beet growers. The Sugar Board is supported by an NFU
executive team of four, one senior advisor, one researcher/economist,
a beet intake manager and an assistant. This resource is funded
by a levy, charged against each tonne sold to the processor, and
collected by British Sugar.
6.9 The inherent imbalance between single
private sector monopoly processor and diverse grower base was
recognised in the 1956 Sugar Act, which governed this tri-partite
relationship following the privatisation of the formerly state
owned processor. At this stage the Government reserved the right
to:
— give directions regarding the
prices to be paid by the then British Sugar Corporation under
contracts for the purchase of home-grown beet (section 17(2));
— give directions to the Corporation
prescribing the total quantity of home-grown beet which the Corporation
might contract to purchase for delivery in any period specified
in the directions (section 17(4));
— prepare for each year a programme
for carrying out research and education in matters affecting the
growing of home-grown beet, and could by order make provision
for carrying any such programme into effect (section 18(1)).
6.10 In addition, section 23(1) ensured
that neither the memorandum of association nor the articles of
association of the Corporation could to be altered without the
consent of the Ministers given with the approval of the Treasury.
6.11 The direct involvement of government,
and so protection of growers, has been watered down in subsequent
legislation (most notably the Food Act, 1984), to a point where
the only protection that growers can demand from the Minister
is appointment of an arbitrator to resolve commercial disputes
and to require the processor to provide information to support
such resolution.
6.12 Whilst statutory protection of the
grower has waned, the processor has evolved from a fledgling,
newly privatised single interest company to become a wholly owned
subsidiary a multi-national corporation.
6.13 Analysis by Savills Rural Research
has assessed the three-year (2002-04) average profit made by British
Sugar per tonne of processed sugar beet to be £18.01. That
is £1 per tonne, or 5.5% higher than the minimum beet price
proposed by the EU. These profit levels have generated an average
return on net assets in excess of 30% over the last three years.
6.14 The commercial relationship between
processor and grower is now governed by the Inter-Professional
Agreement (IPA) which covers a range of detailed matters relating
to price, haulage, processing, sugar content, early and late delivery
payments, contract tonnage entitlement, contract management, seed,
traceability etc.
6.15 It is anticipated by both processor
and grower that the proposed reform will mean a radical re-negotiation
of the IPA. This is likely to be a hard fought commercial negotiation;
ABF Plc has been used to high levels of profitability from British
Sugar; analysis by Savills Rural Research assesses their three
year average profits to October 2004 at £165 million, and
average return on net assets at 34%. ABF Ltd assesses the annual
impact of the reform proposals on British Sugar's operating profit
at £40 million from 2007-08.
6.16 The future of British Sugar relies
upon viable new commercial arrangements with growers; many of
whom will not be in a position to fulfil supply commitments if
the full impact of a 55% price cut is passed on to farm.
6.17 The UK has perhaps the most efficient
processing efficiency in Europe, but to maintain production British
Sugar will need to share some of their additional processing margin
with the grower. If the processor is to continue to prosper, it
needs to secure a viable long term relationship with its supplier
base that offers optimum efficiency and flexibility.
6.18 Working with growers, the NFU Sugar
Board is developing a vision for the future of a viable UK industry.
It will require a considerable commitment to partnership from
British Sugar/ABF Plc.
6.19 This vision requires precisely the
partnership response to reform that the EU envisages in its Impact
Assessment. In recent years, the processor has not been slow to
use its commercial muscle and greater negotiating resource to
get the best deal. If this trend continues, the long-term viability
of the sector, and so the processor, will be substantively threatened.
6.20 Government must recognise the stake
that it holds within the industry, and do what it can to help
processor and grower secure a robust and "future proofed"
commercial partnership.
4 As explained in the previous sub-section, it is
important to note that the UK does not actually benefit from a
higher Minimum Beet price, but that the Commission's theoretical
EU "reference price" of €43.63 falls short of representing
the UK situation principally because of the differing proportions
and prices of A and B quota across the EU. Back
5
If the Deficit Area Premium cannot be retained post-reform its
loss should be recognised in national compensation. Back
6
Savills Rural Research-Internal Briefing Note (Sugar Reform)
9 September 2005. Back
7
Sugar Beet supports up to half the world's population of pink-footed
geese which feed on left-over beet tops in fields in Norfolk.
Beet fields also help declining skylarks and lapwing because they
provide feeding and nesting sites (RSPB). Back
8
The Environmental Impacts of Sugar Beet Reform; Brooms Barn Research
Organisation, July 2005. Back
9
This does not, however, predicate how compensation should be
administered by the Member State. Back
10
ABF Plc press release; Publication of the European Commission's
proposals for the reform of the EU sugar regime 22 June 2005. Back
11
Elliot Morely, Defra response debate, 12 July 2005. Back
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