Danisco is expecting a record sugar harvest as climactic factors have stimulated growth, the year's first field samples indicate, meaning that any excess above quota will be channelled towards non-food uses.
The group conducted the first of its two customary field samples on August 13 in Denmark, Sweden, Germany, Finland and Lithuania. In all locations the tonnes of beet per hectare and the tonnes of sugar per hectare exceed averages for the past five years. While much of Europe has been bemoaning poor weather this year, it seems that this is the reason behind Danisco's bumper crop. Although there have been regional variations, the crop was sewn earlier this year because of the warm and sunny spring, and crops flourished with the heavy rainfall over the summer. The Danish group said that despite the expectation of a record harvest that should "significantly exceed" the group's total EU quota of 929,000 tonnes, the new EU sugar regime means that it is not altering its outlook on earnings from sugar for the current year. A spokesperson could not immediately confirm the current earnings outlook. Under the new rules, which came into effect last year, sugar produced over and above the quota is either transferred to the quota for the following year, or used for non-food purposes.
Danisco says it has been increasing its focus on sugar for non-food uses, such as pharmaceuticals and animal feed. A spokesperson for the company could not say whether less beet will be planted next year as a result of the high yield this year, as it depends how much is channelled to these non-food areas. Danisco will conduct its second field samples at the beginning of September. In full year 2006/7 Danisco reported revenue of DKK 6,995m from its sugar division, compared to DKK 7,881m in 2005/6 and DKK 8,155m in 2004/5. The decline is seen most sharply in the division's margins, which plummeted from DKK 1,035m in 2004/5, to DKK 898m in 2005/6, to DKK 581m in 2006/7.
The new sugar regime was drawn up in a bid to improve competitiveness and market-orientation of the EU sugar sector and guarantee its long term future. It brought the system in line with the rest of the reformed Common Agricultural Policy (CAP), and put an end to a heavily subsidized system that had reigned for some 40 years. The present regime in force until 2014/15. Its aims include a reduction of minimum sugar and sugar beet prices by approximately 40 per cent; a reduction in total sugar production, with a quota sale scheme, and a reduction in EU sugar exports. But it has also led to many of the stalwart sugar producers in the bloc reassessing the balance of their business - and Danisco is no exception. It closed three of its factories in Denmark, Sweden and Finland, sold parts of its quotas in Sweden and Finland, and purchased extra quota in Germany. It also optimised shared functions. These measures resulted in the loss of 350 jobs.
Other companies have also taken steps to safeguard their operations for the long term. For instance, Tate & Lyle has upped its emphasis on ingredients for the health and wellness foods market. CSM finally received clearance to sell its sugar business to Royal Cosun this year, and is now focusing on bakery ingredients and products.
Cosucra exited sugar beet processing entirely when the reforms were announced in 2003 and now active in healthy ingredients, including the prebiotic fibre inulin.