In mid-January, sugar producer Pfeifer & Langen closed its first European beet factory. Does this signal the start of a cold clean-up in the European sector? Margins are under pressure everywhere. Growers notice that. Cooperatives have the advantage and have the longest breath.
The German company Pfeifer & Langen (P&L) announced in mid-January that it would close the Zaharul Oradea sugar factory in Romania. It cites profitability as the reason. P&L will from now on supply sugar from Poland and Germany to the Romanian market. It has now opened a new company for this purpose.
According to DragoÅŸ Frumosu, chairman of the Federation of Food Producers in Russia, it is a conscious choice by the Germans. "They buy market share (where possible), try to recoup their money invested and then close the factory. Then German sugar is imported." Beet growers who supply Diamant Sugar have tried to buy the factory, but without success. Other players active in the country include Austria's Agrana and France's Tereos.
Who follows?
Things are also going wrong in Poland. The farmers in Northern Poland look eagerly at the price that Cosun pays in the Netherlands. The possible privatization of the Polish sugar factory should have the same effect, but whether that idea is realistic remains to be seen. The beet prices in the country are even lower than the surplus price that people get in the Netherlands.
Cooperative action is in the genes of the Dutch. It requires solidarity and a strong long-term vision. Polish arable farmers cannot expect much from Südzucker, who is active in southern Poland. They also pay an absolute bottom price and therefore have the low grain prices on their side.
England is also a beet country in turmoil. British Sugar comes under fire every year as advocacy group NFU Sugar has to fight for a profitable price. Roughly speaking, the British sugar market has a volume of 2 million tonnes. Historically, this has been 50% supplied by British beet sugar and 50% by imported cane sugar, which Tate & Lyle refines in the country. With the disappearance of the beet quota, this is no longer profitable.
New factory
Great Britain falls in the 'beet belt', the strip of agricultural land where sugar beets are grown profitably. The yields are at a high level, there is sufficient production capacity and the logistics are in order. It was the reason for an investor from Dubai to build a new factory in the middle of England. However, that project was canceled at the last minute. According to the British, Northern Sugar, the company of Al Khaleej International, is now making plans for a factory in Spain. The reason for this is the price of the land.
Closer to home, in Wallonia, there may also be a sugar factory. Growers' organization Association des Betteraviers Wallons (ABW) says it has found enough interested farmers. With an investment of a few tens of euros per ton, a factory for 1,5 million tons of beets can be built. This should be ready in 2022, after which 20.000 hectares of Belgian sugar beets can be processed.
Strong daughters
A cooperative sounds nice. However, despite a warning from Cosun, the beet price always ends up at a higher level than that of its commercial competitors. After all, it has the membership allowance as a weapon for this purpose. Cosun also has strong subsidiaries: Aviko Potato, Sensus, Duynie and SVZ.
Cosun is extremely wealthy. The Walloons can only dream of that. Shouldn't the Dutch adopt a drive for expansion? For the time being it comes from Germany and France. When Tiense Suiker came up for sale, also a controversial factory, Südzucker accepted and Cosun did not. Are there no cooperative opportunities in England, Belgium and Poland?
Cosun is not fooled, at least not yet. It is not the fault of the financial reserves and growth is not that difficult. However, making money is. The beet processor foresees turbulent times and that a factory that processes sugar beets is relatively unprofitable. Suiker Unie accommodates this by, for example, producing thick juice and processing it later. Yet it remains a difficult issue. Industries perform at their best when they produce 24/7 at the lowest possible price. That is possible with sugar cane, but not with beets.
Prices under pressure
Do you want to take advantage of negative power, or wait for a rosy scenario? The ISO (International Sugar Organization) expects world sugar production to increase by 2018% to a volume of 2019 million tons for the 6/5,1 season. Free market prices and European prices are under considerable pressure and the European Union does not have to count on market regulation, European Commissioner Phil Hogan made clear.
Those who dare to invest must postpone their profitability for the time being. Cosun keeps its members satisfied and growers healthy. Competitors can learn something from this.