Features International Sugar Journal

EU reform has made the sugar industry globally competitive

I well remember the IIRB congress in Brussels in 2008. Following the announcement in 2006 to the reform of EU sugar regime, mood amongst the delegates, both those involved in the industry as researchers and producers as well as beet seed suppliers, was one of resignation. There was nothing in sight that countered the gloom beset on the industry. The internal reference price of white and raw sugar was cut by 36%, minimum sugar beet price was also cut and beet sugar production was cut by some 5 million tonnes through imposition of quotas. The EU beet sugar sector was simply not competitive (see table 1) against the cane sugar sector. The sugar production cost by even the low cost producers did not match the top exporter Brazil. The reform brought in its wake significant rationalization of the industry, with beet sugar factories decreasing from 213 to 109 and some countries (Ireland, Portugal, Latvia) pulling out of sugar production altogether. With this year being the last before the liberalization of the market makes way for the abolition of sugar quotas next year, the beet sugar sector is now competitive and confident to take on the challenges and volatility in the global market place. The policy makers, it appears, have navigated the industry to compete in global market.

Table 1. EU sugar producing countries, ranking by costs (US$) of production


Beet sugar production cost ranking Countries

Low cost: under $525/tonne1


Netherlands, United Kingdom


Medium cost: $525 – $625/tonne

Austria, Belgium, Denmark, France, Germany, Poland

High cost: $625 – US$850/tonne

Czech Republic, Hungary, Ireland,

Latvia, Lithuania, Slovakia, Spain, Sweden


Very high cost: over $850/tonne

Bulgaria, Finland, Greece, Italy, Portugal, Romania
1 White value, Olympic average (excludes highest and lowest years):2005/06-2010/11

Source: LMC International

What has been remarkable is that both the sugar beet and beet sugar producers have taken up the challenge to drive productivity and competitiveness. The collaborative structure between the processors, researchers and growers has been effective, and quite arguably is central to the sector’s success.

At the IIRB congress in February 2016, Vincent Laudinat from French Institut Technique de la Betterave pointed out that over the last 70 years, sugar yields in France have increased on average by 2% annually. Current beet sugar production averages 15 t – 17 t/ha with the range 7t – 23 t/ha. He suggested that, if farmers optimised operations along the value chain in beet cultivation, it is possible to increase beet sugar yields to 27 t/ha. At the same event, Christer Sperlingsson (Nordic Sugar) emphasised the opportunity of reducing sugar beet production costs by some €1200/ha through improved crop management.

The reform has catalysed expansion in economies of scale (or increase in production capacity of factories) and sugar output per factory (figure 1). Regarding the latter, whereas the average output in cane sugar factories is just 100,000 tonnes that of beet sugar factories in the EU is well over 170,000 tonnes sugar. As sugar companies such as Tereos are gearing to expand output, not by building more factory capacity, but by extending campaign length, fixed costs will come down – increasing campaign length from 100 to 150 days will reduce fixed costs by 33% suggests Sperlingsson.

Figure 1. Impact of EU sugar reform on industy

Ed comment-Augl16

Source: CEFS, European Commission

Not only big sugar companies in the EU will shoulder the onslaught of market volatility that awaits them. As Martin Todd suggested at the WABCG event in Versailles in May ’16, EU sugar producers “have become much more cost competitive globally” (figure 2).

Figure 2. EU’s full cost of production (FOB) vs. No. 5 sugar prices

Ed comment-Augl16-2

Source: LMC International