IN A rickety warehouse on the banks of London’s Thames sit mountains of caramel-coloured raw cane-sugar. For centuries the sweet stuff has come across the seas to Tate & Lyle Sugars’ dockside factory, to be refined into the white stuff. Cane accounts for four-fifths of global sugar production, but only one-fifth of Europe’s. Most of the continent’s sugar is made from beet, thanks to a technique developed in the Napoleonic wars, when an English blockade hit French cane-sugar imports.
No surprise, then, that the sugar-beet industry has been well guarded by Europe’s Common Agricultural Policy. But in recent years the EU has reformed its system of quotas and subsidies to lower food prices and enhance its farmers’ competitiveness; production quotas for milk were dismantled in 2015, for example. Now it is sugar’s turn. From October this year, the EU will abolish its minimum price and production quota for beet. Its complex restrictions on sugar imports will remain, however, as will its income support for farmers.
The beet sector has already been restructured in anticipation. EU compensation schemes have facilitated the closure of factories and a decline in the number of beet growers propped up by state support. Thanks to improved seeding technology, beet yields have been rising, says Kona Haque from ED&F Man, a commodities-trading house. This is particularly true of the “beet belt”, which runs through parts of Britain, France and Germany. Ms Haque expects production to rise by over 17% this year, barring unfavourable weather.
The abolition of support for beet also means that the EU may well become a net exporter of sugar for the first time in over ten years. (Once processed, sugar from beet is indistinguishable from white cane-sugar.) A cap on exports was imposed in 2005, when the World Trade Organisation ruled in favour of a complaint from Brazil, Australia and Thailand that EU support gave its exports an unfair advantage. Refined white-sugar exports could nearly double to 2.6m tonnes a year once support is removed, says Claudiu Covrig from S&P Global Platts, a provider of commodity-market information. But they are unlikely to return soon to the peak of 7m tonnes seen before the WTO ruling, since that would require big investment in export infrastructure. European exporters will face more competition, too: former customers in places such as the Middle East and northern Africa set up their own cane-sugar refineries when EU exports dried up.