Independent consultant and sugar industry specialist Robin Limb considers that while Brexit could potentially offer the chance for many British farmers and associated agricultural industries to grow further, what if, after protracted trade negotiations, we ended up with a system that didn’t recognise the wider environmental contribution of British farmers, and allowed the dumping of state-subsidised and less well regulated imports.
We do not know what Brexit will bring, but in terms of trade, we do know what currently works for industries such as our world-leading beet sugar sector. Many consumers do not know that we produce sugar in this country. British Sugar, based largely in East Anglia and the East Midlands, partners with around 3,000 farmers to produce half the UK’s sugar from the crop, working in total with over 10,000 workers in the supply sector, such as contractors, hauliers, and suppliers.
The UK is one of the most efficient and sustainable producers of sugar in the world, and with the majority of sugar beet grown within 28 miles of one of four processing sites, it is competitive with fairly priced sugar from anywhere. This is good news for British jobs and British farming. Moreover, all our beet growers are Red Tractor Assured, ensuring consumer confidence in our sugar’s quality and provenance.
The EU tariff system we currently enjoy is designed to recognise that the global sugar market is prone to significant distortions, in part caused by three countries that account for around 75 per cent of volumes. In two of these countries – Brazil and Thailand – their sugar industry gets massive government subsidies. Brazil benefits from significant government incentives, while Thailand is currently the subject of a WTO panel dispute over its financial support for sugar.
Almost all countries that produce sugar domestically utilise tariffs and other trade protection instruments. So the WTO default tariff levels post-Brexit, of around 10 per cent, would leave the UK market exposed to sugar dumping, putting at risk the highly capable and competitive beet sugar supply chain in the UK. I could jump a chair as easily as Brazil could import sugar at these tariff levels.
The UK beet sugar industry receives no subsidy, nor would it want to. British Sugar grew its sales volumes within the constraints of the previous EU quota system, delivering quality, service and value for British food and drinks manufacturers, without direct subsidies, minimum prices or other support. But sugar quotas have now gone. European beet producers – primarily France – have already claimed around 25 per cent of the UK market, mainly at the expense of Tate & Lyle, which now holds the remaining quarter.
Leaving the EU gives us the chance to continue to stand on our own, competing against the rest of the world, while providing a high quality, home-grown product for our domestic market. Currently, there is sufficient capacity within the UK to satisfy the internal market demand from beet sugar, supplemented by other EU beet processors and preferential sugar suppliers.
Providing the UK is not undermined by anti-competitive or distortionary market behaviour, its domestic industry can continue to survive whatever is thrown at it. This means more jobs, better products and stable prices for consumers. But we must have a level playing field if our beet sugar industry is to thrive in the future.
Brexit will bring challenges, but with the right trade deals, and building on the advantages we already have, our sugar industry is looking forward to sharing its continued success with the rest of the UK economy. UK beet yields have soared in the past 40 years from around 40t/ha in 1981 to over 80t/ha today. Yield is the only ‘get out of Jail’ card that can protect our industry’s future.
Generally, high yields do not cost more to produce than low yields: the higher the yield achieved, the lower is the cost per tonne of production. This creates a bigger margin for the grower and allows him to grudgingly accept a lower price for the crop. In turn, this allows the processor to maintain a positive margin under increasingly challenging market conditions. There is a 100 per cent difference in margin between the bottom 25 per cent of UK beet growers compared with the top 25 per cent.
There will inevitably be a ‘parting of the ways’ when it comes to who will survive in a post-Brexit world.
In the record-breaking year of 2014, when the UK beet yield averaged 83t/ha, more than 250 beet growers averaged over 100t/ha. Beet growing will inevitably go the way that the potato industry did in the 1980s and 1990s; production became increasingly concentrated into fewer, more professional hands, that specialised in the crop and focused on economies of scale, maximising productivity, reducing cost of production, thereby allowing margins to be preserved.
With Britain’s exit from the European Union looming, and no sign of trading commitments from Downing Street, Britain’s domestic producers and exporters are still in the dark as to whether Brexit will free them up or tie them down. Sugar is only just one of these sectors but, with British beet growers already providing around half our country’s supply, Brexit could well turn out to be very sweet. What opportunities might the ‘brave new world’ afford, and will Britain still retain a seat at the global sugar industry’s top table? Only time will tell…
Robin Limb has over 30 years’ knowledge and experience of the UK and global sugar industry and is now an independent business consultant.