Danisco subsidiary Sucros Oy is calling for more sugar beet suppliers in Finland, claiming that EU sugar reforms have reduced the number of its current growers by an unprofitable 43 per cent.
The sugar reforms, which came into effect in 2006, were put in place following complaints from several World Trade Organisation (WTO) members that subsidised sugar production in the EU gave member states an unfair advantage. As a result, the EU has agreed to lower sugar production by 6m tonnes by 2010, by offering compensation to less profitable producers to leave the market.
Ingredient firm Danisco said last November that it plans to reduce its overall European sugar output by around 135,000 tonnes. However, Sucros Oy, its Finnish sugar processor, is now claiming that the reduction in the number of beet suppliers in the country has been too drastic, and may lead to a loss in profits. According to the company, 812 beet growers in Finland - 43 per cent of the total number - announced they are to stop growing the commodity since the reforms came into place.
These growers account for 35 per cent of supply, Sucros Oy said, a massive reduction is in the overall crop. "We are satisfied that over a thousand beet growers want to continue and even increase their area, but we still need more growers to sign up or increase their commodity," managing director Paivi Paakkarinen said in a statement.
The remaining 1,066 beet growers have decided to carry on with production, corresponding to 80,338 tons of sugar, but Sucros Oy warned that even conservative future estimates can never be certain. "Each year some farmers stop growing and weather conditions may have a big influence on the crop too," Paakkarinen said.
What's more, 8,288 tons of the estimated future crop comes from further than 160km away from the company's processing plants at Sakyla, which it says may not be sustainable in the long term. Sucros Oy also warns that EU compensation for beet growers wishing to stop production may not amount to as much as is commonly thought.
According to the company, financial compensation is only available for an estimated crop of 9,001 tons, even though some growers wishing to pull out of the Finnish market have a quota of 27,837 tons. Elsewhere in Europe, parent firm Danisco closed sugar factories in Denmark, Sweden and Finland over the 2006/07 period, as well as separating its sugar and ingredients divisions into two separate companies.
In its annual results announced in June 2007, Danisco reported a three per cent drop in revenue to DKK20.362 bn (€2.74bn), which was blamed on sugar reform.
The sugar unit contributed 34 per cent to the company's overall revenues compared to 37 per cent in the previous year. The ingredients division contributed to 66 per cent of the company's revenues this year, compared to 63 per cent in the previous financial year.