Productivity-Enhancing Reallocation and Capital Structure of Downstream Markets - Empirical Evidence from the European Sugar Market

This article is concerned with the measurement of productivity and profitability in sugar beet farming. Following the 2006 announcement to abolish the EU sugar quota in 2017, a reallocation of beet production has been observed. We empirically test to what extent the reallocation contributed to productivity growth in the sector using German farm accountancy data. We find that the importance of productivity differences across farms in determining resource allocation is low, but the relative importance compared to profitability differences has been increased after the announcement. The results further indicate that reallocation is hampered by the capital structure of the sugar factories: the contribution of resource reallocation towards sector productivity growth is larger in catchment areas of private sugar companies compared to companies that are owned by farmers who hold secure delivery rights. Acknowledgement :