Farm Ireland

Monday 23 April 2018

Independent view: Value of sugar industry lost in property bubble

Declan O’Brien

The demise of the Irish sugar industry illustrates the obsession with short-term gain which came to characterise Ireland in the dying days of the property bubble.

In 2005 sugar processing delivered over €20m to Greencore in terms of operating profits. Farmer margins had tightened but it was still a worthwhile enterprise and an important break crop for cereal growers.

However, by March the following year the company had announced the closure of its Mallow facility and the country's sugar sector was shut down. Access to compensation under an EU rationalisation plan for the sugar industry was at the very heart of the decision but the move also reflected the total preoccupation of mid-2000s Ireland with property speculation.

The purchase of a 22pc stake in Greencore by Liam Carroll of building firm Zoe Developments in July 2006 confirmed that the company was intent on realising the development potential of its factory sites, especially Carlow. As the Carlow sugar factory had already been closed, Greencore's decision to shut Mallow, and thereby exit the sector, secured a higher compensation payout.

The fact that the industry was profitable, land-based and sustainable was obviously a secondary consideration. In the end, the total compensation package for farmers, contractors and Greencore amounted to €186m. Ironically, the bulk of the payout was cornered by Greencore, with the company netting €127m after a High Court battle with the Government and the then agriculture minister Mary Coughlan.

In the Dail last week, Agriculture Minister Brendan Smith insisted that the decision to exit the industry was made by Greencore, as holder of the entire Irish sugar quota, and not the Government. He said the Government had secured the best possible deal in the sugar reform negotiations. But the fact remains that an industry which was profitable for both the processor and the country's 3,700 beet growers was offered up for short-term gain.

The reasoning behind the policy has also to be questioned. Ireland East MEP Mairead McGuinness has pointed out that EU sugar quotas allow for a maximum 85pc of EU consumption for what is a strategic product for the agri-food and chemical industries.

Indeed, imports of sugar now cost the country more than €95m annually. The European Court of Auditors report on the sugar reforms makes for embarrassing reading for the Government.

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The report's assertion that the decision to close Mallow was based on flawed information has been refuted by the Department of Agriculture.

However, the controversy has reopened old wounds and highlighted once again how normal business sense was distorted by raw greed and the madness of the property boom.

Irish Independent