Sugar beet industry must hope for high oil price

It is hoped for the Dutch sugar industry that the oil price will rise in the coming years. Sugar beet is an excellent raw material for bioplastics. But as long as the oil is cheap, fossil raw materials are preferred. That is a shame, because our farmers can really use support now that the European Union (EU) has abolished sugar quotas.

At the end of November, Suiker Unie reported that the yield per hectare has never been higher than this year. It sounds like a hosanna message, but is it good news? The coming years will be very exciting for the sugar industry.

Without ceiling
European sugar production will take a huge leap, now that there is no ceiling. Know, for example, that the Eastern European sugar industry is making good progress (importing country Russia wants to be self-sufficient by 2021). And the world's largest producers (Brazil, India, Thailand and China) are also increasing their production every year. But nowhere is growth as strong as in the EU.

In short: there is already an explosive increase in sugar production. This while the demand for sugar in Europe is falling. In addition, there is increasing competition from isoglucose, a sweetener from grains that is widely applicable; from drinks to bakery products. Handelshuis ADM speaks of a 'dramatic' growth in supply.

Visions diverge
Visions of the future of the European sugar industry differ considerably. The 1 sees it rosy: "The demand for European sugar is on the rise, because we have the cheapest offer," says Hartwig Fuchs of the German Nordzücker.

On the other hand, there is the fear of overproduction from, for example, Daniel Du Ville of the Confederation of Belgian Beet Planters, who expects a 50% increase in European sugar production in the coming years.

Earlier this year, agricultural economics researcher Bert Smit (Wageningen Economic Research) said that Dutch sugar beet farmers should not worry, because they are among the most efficient farmers in Europe. But he did add that a lower sugar price would cause problems for Dutch sugar beet growers.

being distinctive
Where is the strength of our sugar industry? What makes us distinctive? At product level, we succeed by increasing the sugar content through breeding. The yield per hectare is nowhere as high. Furthermore, our production process is the most efficient. But in my view, 'sustainability' is our most important asset.

With climate targets becoming increasingly compelling, the advanced sugar industry is a prime example of how agriculture can achieve climate targets. There is more to get out of a beet than sugar. Raw materials for paint and bioplastics, for example.

Sugar beets absorb 10 times as much CO2 as forest. And the residual flows can easily be converted into value (animal feed into biomass). Beets are a perfect basic product for the biobased economy.

In other words: a wonderful view of an interesting, new income stream that is also future-proof. But then we do need a higher oil price, as a trigger for chemical companies to get started with affordable sustainable alternatives.   

Johan Geroms

Johan Geeroms is Risk Director at Euler Hermes, the world market leader in credit insurance and corporate debt collection. In his blogs, Geeroms often focuses on developments in the agricultural sector.

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