Farm Ireland

Thursday 23 November 2017

Greencore Plc must shoulder blame for loss of our vital and strategic sugar beet industry

John Shirley

Last week was terrible for confidence in our Irish leadership and structures. In the midst of our worst financial crisis and with the IMF in town, we got only spin and codology from cabinet ministers Ahern and Dempsey.

Alongside this came the revelation from the EU Court of Auditors that Ireland's sugar beet industry had been lost because we acted on flawed assumptions. Two sad messes that could have been avoided, but have arisen from bad governance and leadership.

Presumably the right steps will bring economic recovery -- in time. But will we ever get back our sugar beet industry?

It's worth retracing the steps that led to such a damaging blow to our tillage farming and national economy. To my mind, Greencore Plc must shoulder the blame for the running down and eventual loss of this historic and strategic industry from Ireland.

Greencore was established in 1991 when the Irish Government privatised 55pc of the state-owned Irish Sugar Company that had been in existence since 1926. Greencore was floated at the equivalent of €1.46 a share. This week, almost 20 years on, Greencore shares are at less than €1.35. Greencore has lost all links with Irish sugar but instead is now making low market sandwiches in the UK. Even the familiar "Siúcre" brand sugar, so familiar to Irish homes, is no longer distributed by Greencore.

I would liken the Greencore performance in Irish sugar processing to a son taking over a farm that had been in the family for generations only to blow the enterprise through a series of bad decisions and poor management. Similarly, Greencore lost any commitment of its inheritance; it lost the feel for its industry. Ireland and Irish farmers have been deprived of an industry of fundamental importance.

Greencore actually had a good start. Led by Irish Sugar chief executive Chris Comerford, the new entity stayed within agriculture, building up a complementary malt and grain business through the purchase of the Williams Group and the Food Industries from the stricken Goodman empire. This brought Greencore into malt and flour milling, businesses which were allied to Irish sugar. A potential bid for British Sugar in conjunction with a German processor fell through when the German government pushed the company to invest in newly opened East Germany instead. But at least the effort signalled the Greencore intention to grow the sugar business.

Instead, David Dilger's promotion to chief executive in the mid-1990s led to a series of strange decisions and investments. The worst of these was the $50m foray into the US-based Imperial Holly. Meanwhile, the cash cow of Irish sugar processing kept Greencore afloat and bailed out loss makers such as Imperial Holly.

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Given that the EU was signalling a major reform of the sugar regime, it was understandable that a Plc such as Greencore should diversify in advance, but all the good agriculture companies were sold off to plug the holes created by purchases such as Hazelwood Foods.

When the EU reforms came in 2006, Greencore Plc still needed cash but its blunders for Irish sugar processing were catastrophic.

The biggest problem was the closure of the Carlow sugar factory in 2005, just a year before the EU announced compensation for closing down sugar processing capacity. The general belief was that Carlow was closed primarily to release the value of the large urban site for development.

Others believe that Carlow was also closed to drive a wedge between the growers of Mallow and Carlow. This in turn would soften up the growers into taking the imminent EU compensation.

If this was Greencore policy, it worked. In spite of pleas from Mallow growers to grow beet for at least another year, Greencore closed down Ireland's sugar beet industry in 2006. What are now seen as flawed assumptions prevailed. At the top, the IFA leaned towards accepting compensation once Carlow was closed.

What now? Can we get our industry back? In the light of the Court of Auditors' report, the IFA has called on the EU Commission to restore Irish sugar quota. We await the EU response -- but don't hold your breath.

Dr Jimmy Burke, head of tillage research at Teagasc Oakpark, was another who was vehemently opposed to the closedown of sugar processing. He is not surprised at the latest missal from the EU Court of Auditors.

One of the assumptions that led to the loss of Irish sugar processing was that we were inefficient producers of sugar at farm level. Dr Burke disputes this.

"Irish yields were underestimated because a lot of beet was fed on farm," he said. "I believe that Irish growers are well capable of getting 60-plus tonnes of clean beet per hectare. Beet growing could have been profitable even at the post-EU reform prices."

Burke's opinion is backed by what has happened on the ground. Irish farmers continue to grow 20pc of previous acreage even without a beet factory. Growing the sugar/fodder beet for animal feed has been profitable and the alternatives to sugar beet in a tillage rotation are not nearly as attractive.

Since the Irish sugar exit, the world sugar situation has been transformed. In the past year the world sugar price has soared and the EU is likely to run short of sugar over the coming years.

Lesson 1: Let the EU learn a lesson from its doctrinaire policy on sugar and not repeat the same mistakes on other commodities, especially not on beef.

Lesson 2: Let us look into restoring an Irish sugar beet industry, coupled with an ethanol business. The EU could start by replacing the plants that were closed on false information.

Irish Independent