Sugar War: Wrocław is the battleground

American food processing company Cargill, which has a major production facility in Wrocław, and domestic sugar producers are at loggerheads over EU production quotas for the sweetener isoglucose, currently a thorny subject in Poland’s accession negotiations. Isoglucose is a naturally occurring fructose. When the level of fructose content in a consumer commodity reaches 42%, isoglucose is equivalent in sweetness to sugar. It is, therefore, widely employed as a substitute for sugar in the food and medical products sectors. And it makes for friction with traditional sugar producers, strongly supported by the massive European sugarbeet farming lobby, which in turn campaigns against lower cost production from principally Caribbean countries. Protection The European sugar industry is a fiercely protective one, not only against cane sugar imports but also isoglucose. Beet growers and refiners are effectively behind barriers erected by the CAP (common agricultural policy), which keeps out nearly all sugar cane competition and restricts isoglucose production. Poland now has to fall in line with these rules. The casualty might be the isoglucose facility in Wrocław. The unviable and uneconomical sugar production industry in Poland is also in ferment, with the government feverishly trying to construct a “national champion” state-owned milling company in defiance of foreign investors, principally British and French companies, seeking to extend their footholds. The issue is a tough one in the closing moments of the accession negotiations, which are scheduled to have all outstanding issues agreed by the end of December. EU negotiators have warned there will be no carryovers to the New Year. Negotiations Poland’s negotiators are demanding a national isoglucose production quota of 62,000 tonnes, but the European Union wants to reduce the quota from 40,000 tonnes to 6,200 tonnes. Cargill says it will have no alternative but to close its new plant in Wrocław if the EU allocates the lower quota. “For Cargill it means that the plant would have to cut its current production by half because one of our main lines for isoglucose would have to close,” said Andrzej Różycki, president of Cargill Polska. “It would mean that the production of isoglucose would become completely uneconomical, and the plant itself would have to be closed within a year or two after accession.” Cargill’s priority is to negotiate a Union quota of 100,000 tonnes. On the other side of the fence, Stanisław Dziedzic, business development director of British Sugar Overseas Poland (BSO) doubts Cargill’s threats. Profitable “From the sugar industry’s point of view Cargill has a very profitable factory that is not based on isoglucose but the production of glucose,” he said. “We don’t believe that it’s true that they will move out of Poland. If they don’t get an isoglucose quota, the factory is basically going to make glucose.” Consumption of glucose in Poland is around 2.5 kilograms per head against 11.5 kilograms in the EU. Dziedzic insisted “the production of glucose in the Cargill factory would rise four to fivefold in the coming years and, if they are to move out of Poland, it is only to make more profits by raising production in their plant in Germany.” Prices Experts predict the price of wheat will drop 20% on EU entry, while the price of sugar beet will multiply by 50%, suggesting any attempt to reduce the sugar quota and replace it with an isoglucose quota is against the long-term interests of agriculture. “When quotas are allocated to individual countries, the EU takes into account the supply and demand balance of sugar and isoglucose,” Dziedzic said. “It is absurd to suggest somebody would transport isoglucose from Hungary when you can buy sugar in Poland.” At Cargill, Różycki hit back: “We don’t believe we will end up with 6,200 tonnes. The Polish negotiators should have enough power to get a higher quota - 100,000 or even 200,000 tonnes is feasible. This is production confirmed by existing demand in Poland. “So far the government has been reluctant to give Cargill bigger production possibilities than its actual capacity and the registered demand, and this is where we hope to see some change.” He continued: “We believe the 62,000 tonnes proposed by the government is obviously better than the 6,200 tonnes, but it is definitely too low versus our 120,000 tonnes of installed production capacity and the demand.” The Wrocław plant employs 150 and co-operates with flour mills in the hinterland employing another 1,000. It was completed before the question of isoglucose quotas arose.