Abstract
AbstractFollowing the 2006 reform of the European Union sugar market, and in anticipation of the quota abolition, a reallocation of sugar production has occurred. Using a Lowe quantity index, we evaluate the productivity and profitability of sugar beet farming in Germany from 2004 to 2013. The results show that an increase in total factor productivity partly compensated for losses in terms of trade. Moreover, the contribution of production reallocation to sector productivity growth varied across regions with distinct ownership structures of sugar processing companies. These findings have implications for policy and industry, as it transitions to a liberalised market.
Highlights
The abolition of the sugar quota in 2017 constitutes a turning point for the sugar sector in the European Union (EU)
Beet output and land devoted to beet production are both directly observed in the data-set and land productivity can be computed without estimating input allocations
We examined changes in profitability and productivity of sugar beet farming in Germany over a 10-year period from 2004 to 2013
Summary
The abolition of the sugar quota in 2017 constitutes a turning point for the sugar sector in the European Union (EU). Because the industry is allowed to produce unlimited amounts of sugar, the demand for sugar beet is expected to increase, at least in the short term. Domestic sugar prices are increasingly linked to world market prices, which have been far below the EU’s sugar price in the EU in the past. Production and use of isoglucose (high-fructose corn syrup) as a substitute increases the economic pressure on the sugar beet industry. Questions arise about the EU sugar sector’s response to the new market situation without quota and whether sugar beet farming will remain profitable in the future. To prepare the sector for an era without quotas, a reform of EU sugar policies was implemented
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