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The Case For Keeping An Irish Sugar Industry

13 July, 2006


In an island nation like ours, sugar is a strategic commodity.  It is used in almost every household in Ireland and every food processing operation.  An oil shock or some unforeseen international crisis could drive the transport costs or product costs rapidly upwards.

 

The sugar regime proposed in Europe is not in Irelands long term interests and sells our country short in the way Irish Fishing Rights were negotiated away on entry to the EEC.

 

Production of sugar beet could remain a viable and productive option for Ireland, whether it is refined as sugar or as syrup for the production of Ethanol as a bio fuel. 

 

Sinn Féin proposes that: 

 

1)     The Government rejects the regime proposed in Europe in 2006 and renegotiates a deal to keep the quota.

2)     The Government adopts a national bio fuel policy, in particular ethanol production involving tax incentives

3)     The Government ensures the adaptation of the Mallow and Carlow plants for ethanol production

4)     The Government uses its golden share in Greencore to prevent the dismantling or any other action of the plants in Mallow and Carlow which would compromise its suitability for sugar syrup for ethanol production. 

5)     The Government ensure the retention of sugar making capabilities for the momentum. 

 

This would result in:

 

·        The maintenance of beet growing providing an income for growers and jobs for those working on the collection and production facilities.

·        Maintenance of a strategic crop production for Ireland.

·        A considerable boost in bio fuel production which would at least match the proposal by the European Union that all petrol has 5.75% of bio fuel as a constituent.  Just as importantly it would be an indigenous energy industry.

 

A Brief History of Irish Sugar

Sugar production from sugar beet was begun by the Irish Free State in Carlow in 1926 and Mallow in 1933. (Factories were also built in Thurles & Tuam)   It took until the fifties for the industry to become viable and it provided a source of income for growers and those working in the plants, a rare alternative to the immigrant ship.  A national programme of Research and Development, liming and mechanisation led to a successful industry by the 1960’s. Each factory had an initial production capacity of 1,500 tons which eventually rose to 7000 tons.

As equipment and transport improved it became more efficient to focus production on Mallow and Carlow. The industry provided significant rural employment and gave rotational benefit to subsequent crops grown on the land.

 

The Company Comhlucht Suicre Eireann Teoranta was privatised in 1991 and sold to Greencore with the government retaining a golden share. The golden share gave the government a veto over a) the sugar quota, b) the land on which the factories stand c) the buildings and machinery in these factories. 

 

Sugar was only one element in Greencore’s portfolio and the national interest in having a successful sugar industry soon slipped off the agenda.  Research and Development was gradually run down by Greencore.  However it still remained a very viable industry and by 2004, 7000 tons of beet was grown for each factory which in turn each produced 1000 tons of sugar.  This was a good return by international standards.

 

In 2005 Greencore suddenly closed the Carlow factory.  The capacity of Mallow was increased by cannibalising some of the Carlow plant.  However transport costs meant that it was never viable for the 7000 tons of beet grown in the wider Carlow region to be absorbed by the Mallow plant. 

 

In the spring of 2006, Greencore announced the closure of the Mallow plant.

 

Greencore is a public company whose primary purpose is the making of profits.  The potential value of the Carlow and Mallow land banks became more profitable than the long term production of sugar.  Thus the interests of Greencore diverted sharply from the interests of Ireland. 

 

At the same time the EU sought to reform sugar production in Europe to avoid over production on the world market.  Somehow, and it has never been explained how, the Irish government delegation was unable to negotiate to keep Irelands quota of 200,000 tons while France increased its quota by 350,000 tons.  Finland, whose production efficiency is lowered because of their cold weather, maintained their quota.  Similarly, Greece who because of their climate irrigate all their crops thus adding to their cost, also maintained their quota.

 

The Need For Bio Fuel Production

 

Ireland is heavily and dangerously dependant on imported oil and gas.  There is also a European requirement that bio fuel replaces 5.75% of petrol imports by 2010.   The government’s laissez-faire attitude is that we can import this to avoid fines.

 

This ignores the need not just to convert from carbon fuels but to build our own strategic indigenous fuel production.  But then the government has no policy on diversifying our fuel needs from our dependency on 100% imported fuels.

 

The plants in Carlow and Mallow are eminently suitable for conversion to producing a thick syrup from sugar beet for ethanol production.    To build such plants from scratch would cost many millions and there are doubts about the viability of building brand new plants in the immediate future. 

 

Irish firms are investing in such plants in Germany where the government has a much more proactive approach to bio fuel production.  NTR is investing nearly 70 million euro in Germany to produce bio fuels from rapeseed oil.  The crucial difference between Germany and Ireland is that there is active government support for a bio fuel industry there.  However as the industry becomes established, costs will lessen.  This combined with the rising cost of imported carbon fuels will lessen the need for subsidy from the government.

 

NTR raised the possibility  of the Mallow plant producing thick syrup but Greencore expressed their interest in selling the site a brown field site rather than carrying on production there.

 

Price  & Compensation

Price:

Earlier in the year the  EU projected significantly lower prices for sugar beet which some farmers felt  was unsustainable.  However some farmers feel that even at this price a profit could be made.  What would be necessary to make this price tenable is more research and development.  If it is sustainable for countries like Greece and Finland whose climates make it more costly to grow beet, then Irelands which has an ideal climate, must be able to produce the crop profitably.  Obviously France in increasing their quota by 35000 tons feels that its farmers can produce beet at an economic cost.

 

The EU sugar regime made its decisions at a time that sugar prices were at an all time low.  Since then white sugar prices have risen sharply on the world market almost doubling in price (from 270 US$ per ton to 470 US$ per ton).  Major agriculture producers such as Ukraine, Russia, India and China are increasing their production bases to meet anticipated rising sugar prices. 

 

The main area which is pushing sugar prices up is the increased production of ethanol from sugar cane, reducing world surpluses of white sugar stocks.

 

Beet plays a very significant part in tillage rotation and no value has been put on this.  In an era when we are trying to reduce chemical input into food production crop, rotation plays a crucial role in any tillage farm.

 

The anticipated future for sugar beet production across the world is for rising prices.  Irish Farmers should be in a position to be part of this market.

 

Compensation

 

While the exact figure are not yet clear it appears that for the destruction of the sugar beet industry each farmer would get compensation amounting to the price of one acre of agricultural land or that of a small car.  Greencore, for destroying an industry, would get 100 million euros or thereabouts. 

 

This compensation while initially attractive pales into insignificance when the long term viability of an industry based on sugar beet production is considered.

If we fail to meet the bio fuel requirements agreed with Europe, Irish taxpayers will have to pay penalties. 

At the moment the horse trading is between the IFA and Greencore as to who gains what share of the compensation for the destruction of an industry.  Sinn Féin argues that the national interest, not short term profits, should be put first.

The Golden Share

The government in the person of the Minister for Agriculture, Mary Coughlan and the Minister for Trade & Commerce, Michael Ahern have both argued that the governments golden share does not give them much power within the company.

 

Sinn Féin has been made privy to legal advice which would indicate that this is not a true reflection of the legal position.  The Memorandum and Articles of Association of the company, specifically article 2 would support this legal viewpoint.  The reality is that major powers are invested in the government regarding the future of the Mallow and Carlow plants.  Greencore requires written permission to dismantle, move or change the factories.

 

It is further provided in Article 2 (d) of the Articles of Association of Greencore that without the consent of the Minister for Agriculture, no sale, transfer or disposal of:-

(a)  any sugar quota,

(b)  any properties, lands and premises including the lands at Carlow and at Mallow

can take place without the consent of the Minister for Agriculture.  The same restriction applies to the plant machinery, fixtures and fittings used in the processing of sugar in the State.

 

Furthermore there are a number of decided cases in Europe which would support the validity of Governments of member states retaining golden shares. 

 

Again Sinn Féin has been made privy to legal advice that the government can introduce a Statutory Instrument which would ensure that the golden share which it holds in Greencore complies with the criteria which would make it valid in European law. 

 

It is reasonable to conclude that there is no legal impediment to the Government exercising its golden share to ensure the plants in Carlow and Mallow are retained for the production of sugar syrup for the production of Ethanol, if it has the political will.   This would put the Irish Government in a very strong position to ensure Greencore does not destroy the production facilities in Mallow and Carlow.

 

How Ireland Can Maintain Its Sugar Beet Industry

In an island nation like ours, sugar is a strategic commodity.  It is used in almost every household in Ireland and every food processing operation.  An oil shock or some unforeseen international crisis could drive the transport costs rapidly upwards.

 

Sugar Beet is the ideal crop in Irish tillage farming.  It suits our climate and provides a valuable kingpin in the rotation cycle.  Just as it has in the past, the growing of sugar beet can provide a stable income for growers and producers in rural Ireland.  At a time when the rural way of life and farming are coming under such intense pressure we cannot afford to throw away this strategic crop.

 

The power to maintain sugar beet production in Ireland rests with the Government. 

 

The failure by government ministers to maintain our quota is as serious a loss to Ireland in the long term as the catastrophic decision on entry to the EU to give away our fishing rights.  The contrast between France gaining 350,000 tons of quota, countries with difficult climates such as Greece and Finland keeping theirs and Ireland loosing their entire quota is sharp. Embarrassing as it may be to individual ministers, the Government will have to go back to Europe and demand a renegotiation of the sugar regime.  Ireland must maintain a quota.

 

The sugar beet industry could remain a viable and productive option for Ireland, whether it is refined as sugar or as syrup for the production of Ethanol as a bio fuel.  World prices for white sugar are rising and are expected to continue to do so. 

 

There is also the option of growing sugar beet for the production of ethanol as a much needed bio fuel.  There can be few who would argue against the development of an indigenous bio fuel industry.  Some firms have already expressed an interest in the production of bio fuels in Mallow.  Already other major European countries are using parts of their quotas to produce ethanol.  Similarly countries such as China and Russia are growing increasing amounts of sugar beet to produce ethanol. The most efficient method for Ireland to maintain the sugar beet industry would be to gradually process less beet for sugar and more beet for ethanol.

 

For this to be cost effective, the plants in Carlow and Mallow must be maintained.  The government have the power through the golden share to negotiate for the transfer to the state of these plants at a reasonable price.  What is needed now is political will, the will to maintain and build on this traditional Irish industry.

 

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