UK sugar beet sowings have risen even faster than those in
many other European Union countries, as the nation braces for the knock-on
effects of Brexit as well as the bloc's industry deregulation.
Associated British Foods, currently the sole processor of UK
beet for sugar, said the area it had contracted with farmers for growing sugar beet
"has been increased by a third" for 2017-18.
That is double the 15% rise in EU beet sowings overall, as
estimated by commodities house Sucden, and larger too than the 16.7% increase,
to 110,000 hectares, in UK plantings as forecast by US Department of
Associated British Foods, adding that the UK beet crops was "now
well established and making good progress", highlighted the ditching in October
of EU sugar output quotas, reforms which are encouraging the expansion in the
'Largest importer of
Indeed, the ABF comments follow a forecast two weeks ago
from France's Tereos, the world's third largest sugar producer, that its domestic
sugar beet processing volumes in 2017-18 will rise by one-quarter to 19m
Smaller rival Cristal Union has estimated that its growers
will raise sowings this year by 25%.
However, the UK industry faces an extra incentive for
expansion, given that it is a major importer of EU sugar – trade over which
Brexit has placed a question mark.
The UK imports roughly half of the 2m tonnes or so of sugar
it consumes every year, with some 60% brought in as raw sugar, and refined in
the country, but approximately 40% in the form of white sugar purchased from
elsewhere in the European Union, mainly from France.
"Brexit threatens a major export destination for continental
EU sugar exports," according to the USDA, which rates the UK as "the largest
importer of EU sugar".
Turning back the
Indeed, the prospect of a more domestically focused sugar
supply chain has prompted signs of a reversal in a decades-long retreat in the UK
beet industry, which has consolidated in the key East Anglia arable farming
Al Khaleej International, the sugar giant based in the
United Arab Emirates, has submitted plans for what would be first sugar beet
factory built in the UK for 90 years.
The factory would be built in Yorkshire, in northern
England, near to where British Sugar closed a plant a decade ago, and would
produce some 5,000-6,000 tonnes of sugar a day.
Associated British Foods' comments came as the group
outlined a "strong" performance over the last three months, reporting 20% growth
in sales and adding that its underlying operating performance had come in ahead
of its expectations.
The group said that it had enjoyed "strong" revenue growth in
sugar, adding that the retreat in world prices of the sweetener would have "little
impact" for now, given that most sales in the European Union were being made at
The southern African Illovo business will see its sugar output
rise by some 300,000 tonnes to 1.7m tonnes in the year to September, thanks to
the retreat in drought conditions in the region.
However, ABF attributed its improvement in particular to "stronger
profit delivery" at the Primark clothes retailing business, "which has
marginally improved our group outlook for the full year".
The group's shares stood 2.6% higher at 2997p in afternoon
deals in London, having earlier touched 3102p, their highest in 10 months.
Credit Suisse nudged higher by 150p, to 3350p, its target
price for the stock, on which it kept an "outperform" rating.
"Primark clearly holds the key to valuation here, and this
update confirms it is in robust health," Credit Suisse analyst Charlie Mills