EU Reform of the Sugar Beet Regime: Implications for UK Agriculture

The purpose of this article is to discuss possible scenarios for UK sugar beet production after the reform of the sugar regime. The analysis is built on an evaluation undertaken by the University of Cambridge and The Royal Agricultural College of the impact that reforming the EU sugar regime may have on UK agriculture. The analysis focuses on the implications of reductions in quota and the support price and on the possible reactions by British Sugar, as the final outcome in terms of production will depend on the interaction between British Sugar and sugar beet farmers. The analysis indicates that British Sugar strategies such as reallocating the available quota to the more efficient producers or paying higher beet prices might mitigate the impacts of the reform. The key factor in limiting the overall impact on production is the extent that the industry can restructure and reduce its cost base. For example, following a 40 per cent reduction in the sugar beet price we estimate that if farmers could reduce their average costs by 20 per cent, about 52 per cent of UK beet production would still be viable, compared to less than 20 per cent if costs were not altered. Copyright The Agricultural Ecomomics Society and the European Association of Agricultural Economists 2006.