Farm Ireland

Thursday 24 August 2017

No compensation for the loss of a vital industry

The recent Court of Auditors report has re-ignited the debate on the controversial closure of the Mallow sugar factory in 2006

A sugarbeet harvester long past it's working life
A sugarbeet harvester long past it's working life
Sugar beet farmers demonstrate at the EU Council
Declan O'Brien

Declan O'Brien

The recent Court of Auditors' report on the EU sugar reforms and the closure of the Irish industry has left a sour taste among many sugar beet growers, and particularly those who fought for the sector's retention.

This feeling is particularly strong in Cork, where opposition to moves to shut down sugar production in 2005/06 was strongest.

A leading player in that fight was Jim O'Regan. A tillage farmer from Kinsale, Mr O'Regan was the chairman of the IFA beet committee from 2002 to January 2006.

He is adamant that the industry could have been saved and believes that the stance taken by those who opposed the closure of Mallow -- and in effect the closure of the industry -- has been vindicated by the Court of Auditors' report.

The background to the demise of the Irish sugar industry is a complicated tale in which the plight of impoverished sugar cane growers in the developing world became entwined with the ambitions of some of Ireland's leading property tycoons.

Prior to the reform of the EU sugar regime in 2005/06, member states had specific sugar production quotas, with European prices maintained by the imposition of tariffs on imports.

An agreement with a number of poorer sugar-producing countries from Africa, the Caribbean and Pacific (ACP) allowed a given volume of sugar to be imported into the EU at preferential prices.

The bulk of this ACP sugar and surplus sugar produced within member states' quotas was sold on world markets with the help of export refunds.

However, under WTO agreements, the EU was forced to limit exports of subsidised white sugar, including the ACP volumes, to 1.37m tonnes by 2006.

This resulted in proposals for the reform of the EU sugar industry. These reforms aimed to cut overall production across the EU by 30pc or 6m tonnes, with growers and processors being offered a compensation package to reduce or cease production.

In the rationalisation programme that followed, Ireland was the only country to exit sugar production completely, even though the country had a quota for just 220,000t of sugar, which represented a tiny fraction of total EU production.

Most sugar beet growers place the blame for the loss of the industry on Greencore, who controlled the Irish sugar processing sector.

However, Jim O'Regan and other former growers, such as Colm Milleric and Denis Howard, argue that the Government and IFA were also culpable.

Greencore had signalled its intention to depart the industry as early as March 2005 when they announced the closure of the Carlow processing plant. Plans to develop the factory site were at the heart of the move.

The purchase of a 22pc stake in Greencore in July 2006 by Liam Carroll, of building firm Zoe Developments, confirmed that by the time the Mallow factory closed in March of that year Greencore's sugar business had essentially become a property play.

A €120m compensation payout under the EU sugar reform programme was an added incentive for the company to cut and run.

However, Mr O'Regan maintains that Greencore was not the only one to be bitten by the compensation bug.

"The whole focus from IFA headquarters from mid-2005 was on compensation," Mr O'Regan claimed.

While he admits that serious differences emerged between Carlow and Cork growers in the aftermath of Greencore's decision to close the Carlow factory, he maintains that the vast majority of Cork and Wexford sugar beet producers wanted to continue with the crop.

"There were growers in Cork who stood to get huge compensation packages but they didn't want the money, they just wanted to continue growing beet."

This view is supported by Denis Howard. The Castletownroche tillage farmer believes enough growers would have continued in beet had there been more backing for retaining the industry.

"All I wanted to do was continue to grow beet. I had no interest in compensation. Growers were paid €71/t compensation, but that's only double what growers are getting now for the crop and demand for sugar is booming," Mr Howard said.

He rejects suggestions that the acreage of sugar beet would have collapsed as the base price for beet was pulled from €38/t in 2006 to €26.29/t by 2009 as part of the reform package.

"We never worked off the base price. That was the reality of the situation. Growers were always making a decent premium above the base price," the north Cork farmer added.

"The overwhelming majority of Cork growers wanted to stay in beet but the senior officers of the three Cork IFA county executives and three of the eight sugar beet industry representatives from the county didn't support the growers but backed the IFA head office line on compensation."

Young growers such as Colm Milleric are angry that the decision to abandon the sugar beet industry was taken by older growers who had one eye on retirement.

Mr Milleric said these growers had the good fortune to build up their farm businesses on the back of beet but the same opportunities were closed off to his generation.

"The age profile in the industry was all wrong. In my area of Ballymacoda and Killeagh there were 104 growers in 2005 but just six were under 35. This was because the last time quota was distributed to new growers was in 1988," he said.

"Every grower had a right to take the compensation and get out but they didn't have the right to close down the whole industry."

Jim O'Regan contended that other avenues for developing the sector were not pursued.

He said proposals from Cork County Council to develop a bio-ethanol plant at the Mallow site were not backed because of the preoccupation with securing a compensation package.

However, this contention is totally rejected by David O'Brien. The Clonakilty tillage farmer is a former beet grower and was on the IFA negotiating team during 2005 and 2006.

"We looked at the various proposals for Mallow but there were no hard figures there regarding what would be paid to growers," he insisted.

Mr O'Brien said the decision to close the Irish industry was essentially influenced by the change in EU policy as a result of the WTO agreement, and the attractiveness of the compensation package for Greencore.

"Greencore knew that it wouldn't be viable for many growers to grow beet by 2008 because of the drop in base prices so the challenge was to get as many growers as possible for 2006 and 2007," Mr O'Brien recalled.

"We desperately wanted to grow in 2006 and we broke our ass to get enough acreage sorted for 2007," he added.

"You couldn't say that IFA hadn't a commitment to sugar beet growers. We had a guarantee that the price for 2006 would be the basis for compensation. We had an agreement that acreage up the country would be grown further south.

"But Greencore weren't convinced that we could deliver the full 1.1m tonne quota and they said the plant wasn't viable if they couldn't get that."

Mr O'Brien accepts that some elements of the negotiations could have been handled differently but he does not agree that the industry could have been saved.

"Hindsight is a mighty weapon," he said. "We could have got 2006 but 2007 would have been questionable. The compensation package was an opportunity for inefficient growers to get out.

"To stop what happened, the Commission would have had to change the regulation and this would have gone counter to the WTO agreement and that was not going to happen."

Mr O'Brien makes no apology for the IFA seeking to maximise the compensation payment for growers.

"When Greencore went for closure, the IFA had no choice but to go for the maximum compensation. There was no other credible option," he said.

All parties agree that sugar beet has been a huge loss to the tillage sector. The fact that 20,000 acres of beet are still grown today as a feed crop highlights its worth, both as a break crop and a valued crop in its own right.

Indeed, the IFA established an alternate land use committee in the wake of the closure of the Mallow factory in an effort to indentify a crop to replace sugar beet. However, four years on, a viable replacement has still not been found.

"Someone should tell them to have a look at fodder beet," Colm Milleric said jokingly.

In light of findings of the Court of Auditors report, Jim O'Regan maintains that there is now an onus on the Government to seek the reinstatement of the Irish sugar quota and processing industry.

While hopes of getting sugar processing back up and going again may be slim, Mr O'Regan says the EU should at least return the quota and then facilitate a tender process to see if any commercial entity is interested in reviving the industry.

"Any new facility would have to be a multifunctional enterprise, combining the production of sugar and ethanol with a heat and power plant," Mr O'Regan said.

In the meantime, Ireland will continue to fork out more than €90m annually in sugar imports. Even the sugar in the old Siucra bag is now sourced abroad; Greencore having sold the brand to a German company.

Irish Independent