Beet! Give me a beet!

It's hard to make a sugar beet look sexy. What do you think, did the PR people of this campaign succeed?

Ah. You're wondering what this is all about - and what it has to do with Romania. Good questions, both of them. The first one I'm going to answer today. If there is any interest at all, then I'll answer the second question tomorrow. Personally, I encountered this particular sugar beet for the first time about three hours ago, as I turned a page in my beloved Zeit magazine and saw a one-page ad by the German sugar beet industry. Until then, I had been blissfully unaware that the EU plans to recklessly ruin the livelihood of thousands of German (and other EU) sugar beet farmers. In order to understand the sheer magnitude of this problem, you have to know that large areas of Germany look like this:

Sugar beets are an object of pride to Germans, you have to understand. Until the 1800s, sugar was made only from sugar cane. As this is a tropical plant and even the most favorably minded person would not call the German climate a tropical one, this meant that Germany had to rely entirely on imported sugar cane. However, in 1747, a German chemist by the name of Andreas Sigismund Marggraf discovered that beet juice contains a comparably high percentage of sugar. He developed a method of extraction which, unfortunately, wasn't very economical. Then, in 1801, another German chemist, Franz Carl Achard, refined the process and thus laid the foundations for mechanical extraction. In the same year, the first sugar beet factory was opened in Silesia. (Not to forget that the sugar cube is also a German invention. Knowing all this, you cannot but call the Germans sweet guys, eh?) Anyhow, the Germans having a sweet tooth, sugar from sugar beets took off like rocket. It helped that Napoleon sealed off the European harbors in 1806 and sugar cane was not to be had anymore. These days, 55% of the world sugar production comes from beets. Back in the good old days, namely in 1968, the then EEC passed a decree that guaranteed fixed prices for sugar beets to European farmers -- to protect them from price swings and cheap imports. (Sugar from outside the EU is up to 50% cheaper.) WTO called this sugar decree "medieval", the German Wise Economic Men (a group of, well, wise economic men) criticized it, as did the OECD. To no avail -- since this subsidy is not tied directly to the budget of the EU, there has been little incentive to change or simply abolish this law. It's all coming out of the consumer's pockets -- an estimated 6.3 billion Euros in additional costs for the expensive sugar per year. The decree has been extended numerous times, and in its current life will run until 2006. The excitement stems from the fact that the EU is thinking of not extending the decree anymore -- or rather, changing it considerably. In essence, the fixed price is to be cut by one third and the European production quota is to be cut by 16%. (This move may have to do with law suits that some countries threatened to file.) In plain words, it means that the good times for sugar beet producers will be over. The "license to print money", as one German politician put it, is about to be revoked. Yeah, I'd be pissed too. Mind you, I'm all in favor for opening markets. I don't like subsidies (as a former, reformed economist I actively despise them). Susidies always create problems in the long run. That's why my first reaction was, so what? Chocolate will get cheaper and the farmers will lay their fields fallow, cashing in EU subsidies for that. You have to understand that sugar beets are EVERYWHERE in Germany. So the argument that cutting down on sugar beet production would result in a monoculture? I'm not biting. I'm willing to be proven wrong, though. Show me that the sugar beet is important for the German eco system and I might give the guys from "Existenzfrage Zucker" (existential topic sugar) another look. It has to be a good argument though -- I'm reacting slightly allergic to the claim that the fight for keeping the sugar decree is, "well worth fighting for" and a matter of national pride. Tomorrow: What the sugar beet decree and its demise mean to Romania.

Comments

[Scott Raun]

Yeah, I'm interested in what it means to Romania.

[Tina]

Me too. Our politicians are well known for passing stupid laws, though...

[claudia]

Doug politely pointed out that I translated "Existenzfrage" wrong -- and me being a trained translator. [Sigh]

It means: a question or topic concerning existence, survival.

So, nothing to do with Sartre. Sorry.

[Carlos]

The US has interesting subsidies along those lines too, but more for our domestic cane sugar industry (though beets are also important). I've wondered why it hasn't been packaged as public health legislation -- cheap sugar leads to increased obesity et cetera. In Germany, you could even package it as human rights legislation, since working in the cane fields is godawful. Much more humane to have a guy sitting in a tractor.

C.

[teep]

I found a neat little report out of the University of Florida that goes over price supports for sugar...

http://edis.ifas.ufl.edu/BODY_FE375

Real world prices: $.10/lb, raw.
US prices: $.18 per lb, raw (.22/lb refined beet)
EU prices: > $.30/lb, raw.

The next link gives some nice Excel data on sugar prices for the world and the US...

http://www.ers.usda.gov/Briefing/Sugar/Data/data.htm
(in cents per pound)

World, Sept. 2004: 9.10 raw, 11.12 refined
US-Only, Sept. 2004: 20.47 raw, 23.50 refined

Very educational blog you have here -- I learn all kinds of things.

[Brian DiNunno]

The Washington Post had an article a month or so back on the sugar beet industry in the US.

http://www.washingtonpost.com/wp-dyn/articles/A34133-2004Sep19.html

The article is couched in terms of the presidential election, since the area affected is the Red River valley of Minnesota (swing state) and North Dakota. Sugar Beet production didn't take off up there until the 1950's, despite the presence of German and Scandanvian farmers. The current "threat" is increases in sugar imports from Central America.

One thing to point out in all this is that the "cheaper sugar for consumers" argument won't show up much in buying sugar off the shelf. The price paid for that is more closely related to transport and retail shelf space than raw sugar price. Processed food containing sugar could be affected, but I would remain skeptical about how much of that price savings would be passed down immediately. High fructose corn syrup has already chewed into sugar beet and cane sugar in many prepared food processes.

[claudia]

Carlos said:

I've wondered why it hasn't been packaged as public health legislation -- cheap sugar leads to increased obesity et cetera.

Well, in the States that one might fly but not in Germany. In our law system, there is no provision for anything like that. You're responsible for your sugar consumption, not the sugar factory.

I wondered whether I should mention the US version of the sugar subsidies but thought it would blow the whole thing out of proportion.

Brian --

High fructose corn syrup has already chewed into sugar beet and cane sugar in many prepared food processes.

AFAIK, this is only true for the States. In Germany (and Europe in general, I believe), corn syrup is virtually unknown. Even our coke is still made with sugar, not corn syrup.

I'm also not sure whether the reduced price would be passed on to consumers. They're used to paying higher prices, right? Why then lower the price, if you can have double the profit from cheaper sugar...

That's why I'm against subsidies. They screw your economy up (or someone else's), but simply taking them back doesn't do much good, either.

teep -- interesting! And thanks for the compliment. We try. :-)

Claudia - off to do some research on sugar beets, Romania and the EU