Efforts under way to revive sugar industry

In 2006, Ireland accepted EU compensation to dismantle the beet industry. Now we want back in.

When the Waterford to Rosslare train line finally ran out of puff in 2010, its slow demise could be traced back to a decision taken four years previously: the acceptance of EU compensation by Ireland’s sole sugar producer in return for dismantling the State’s beet industry.

That decision has been much lamented, but in the past year attempts to resurrect the industry here have started to gain pace.

Two groups in particular, Beet Ireland and the Irish Sugar Biorefinery Group, have made robust proposals for the country’s re-entry into the market, and the campaign now enjoys strong support at home.

Last month Taoiseach Enda Kenny told Beet Ireland he strongly believed in the project and recognised how it would contribute to Ireland’s future economic success, while Minister for Agriculture Simon Coveney has consistently advocated for the industry.

But any hopes of a return to sugar production depend on a number of factors, among them the construction of a €350 million-€400 million processing plant and, crucially, approval from Europe.

In 2006 the EU introduced a temporary restructuring scheme to bring European sugar production in line with World Trade Organisation and other international obligations. The scheme established a pan-European quota until 2015 and offered less-efficient countries incentives to cease production.

Greencore shut its Mallow facility with the loss of 320 jobs. For their troubles, the company received €127 million, beet growers got €220 million, while machinery contractors received €6 million. Bulgaria, Latvia, Portugal and Slovenia abolished their sugar operations along with Ireland, allowing strong producers such as Germany, France and Holland to thrive in a changed market. Following the reforms, sugar prices soared.

Escalating food demand

“Really it was a supply and demand issue,” says Prof Jimmy Burke of UCD’s School of Agriculture and Food Science. The world demand for food started to escalate rapidly from 2002 and continued to climb at a higher rate than initially anticipated. In order for Irish production to be viable, sugar needs to trade at above €500 a tonne. It currently realises between €700 and €800 a tonne.

According to Burke, European countries have made more money from sugar operations since 2006 than during the 50 previous years. “No one foresaw which way the market was going to go.”

The end of the industry here had consequences beyond depriving the under-utilised Rosslare train route of vital freight. Earlier this year Senator Mary Ann O’Brien, who runs Lily O’Brien’s chocolates, said her company found it challenging to win lucrative tenders that prioritise security of supply, provenance and price, without the domestic availability of sugar.

Where Ireland was once a net exporter, with the industry contributing some €60 million to the economy, we now import about €200 million worth of sugar a year, leaving the indigenous confectionary and drinks sector with huge overheads.

Andrew Doyle, chairman of the Joint Oireachtas Committee on Agriculture, Food and the Marine, says Ireland can make a compelling argument for re-entry into sugar production. If it was produced at home it would not only cut down on transport costs, but would also provide a product with a plethora of secondary uses such as animal feed and crop rotation. “This is a key raw material that we can’t be obliged to import for ever more.”

In July the joint committee heard proposals from Beet Ireland and the sugar biorefinery group, both of which had compiled feasibility studies on a return to the industry. The latter estimates the revival would create as many as 5,000 jobs in the southeast, a prediction that has since been adapted as part of Sinn Féin’s job creation plan.

According to the feasibility study, 500 of those jobs would come from the construction of the new plant. When Greencore left the business in 2006 it took with it the infrastructure for sugar production and the Government has since made it clear that any venture to develop a facility would have to be financed in total by investors and interested parties to be viable.

Beet Ireland claims to have investors lined up for the construction of a new facility, which is estimates will cost about €400 million. Michael Hoey, the group’s chairman, says a “major investor” has already agreed to come on board, but there are also “a number of smaller investors that know this will be a very successful industry to bring back”. Their model will also include a co-operative element whereby beet growers pay for their quotas in the form of a bond.

Hoey believes a revitalised sugar beet industry will contribute to Ireland’s food exports, one of the few areas of the economy currently performing well. He says it’s in Europe’s interest to allow Ireland back into the market and adds that a proposed bioethanol production facility at the plant would contribute towards EU renewable energy targets.

But the European resistance is political, with EU member states that have benefited from the new regime lobbying to maintain the status quo beyond 2015. Last week at the farm council meeting in Brussels a majority of member states refused to back down on a demand that the commission extend sugar quotas until 2020.

Ireland against

Fourteen member states want to see quotas prolonged. Ireland is among a minority against the proposal, as is Slovenia, which last week said an extension would be “totally unacceptable”. It, too, wants to re-enter the now booming sugar industry and has said if the quotas are not lifted, there should be “an appropriate solution for those member states that had abolished their sugar beet production”.

For Mairéad McGuinness MEP, this means offering Ireland a quota to allow it back into the market. Although she acknowledges that Ireland accepted compensation to withdraw from the market and, as such, has no strong claim for re-entry, she says “we’re making very small steps” towards future inclusion.

Negotiations may become more complicated next year when Ireland holds the EU presidency and won’t want to appear to act disproportionately in its own interest. But nonetheless McGuinness remains “more optimistic than I have been in the past”.

Bittersweet end Sugar infrastructure gone

In 2006 Greencore plc accepted EU compensation to relinquish its sugar quota and in effect brought the Irish sugar industry to an end.

According to the CSO, sugar beet was worth €60 million to the Irish economy in 2005. Beet Ireland estimates we spend €200 million a year on sugar imports.

Although farmers still grow the crop for fodder, there is no longer any sugar infrastructure in Ireland. Estimates suggest a new production facility will cost between €350 and €400 million and create as many as 5,000 jobs.

Sugar sells for between €700 and €800 a tonne, well above the minimum price of €500 a tonne at which Irish production is viable.

The Government has voiced its support for proposals to re-establish the industry if investors provide the capital for the new facility.

The task now for Irish politicians is to convince Europe to either abolish quotas in 2015, as originally planned, or grant Ireland a quota if the regime is to be extended.

Beet Ireland is looking for 250,000 tonnes. The total European quota is 13.3 million tonnes.

source: irishtimes