Letter from... Ireland

Siobhan Creaton reports on the decline of the sugar industry in Ireland

Ireland’s last remaining sugar producing plant will shut its doors this month with the loss of more than 300 jobs. The closure of the Irish Sugar factory in County Cork will mark the end of a 155-year industry and will leave Ireland as the sole European state not producing sugar.

Employees at the Irish Sugar plant had been braced for bad news ever since the EU Council of Ministers sanctioned a radical restructuring of the industry as part of its negotiating position at the GATT World Trade talks last November.

Brussels was under pressure to open the lucrative EU markets to sugar producers from the Caribbean and Africa, and approved a series of measures that would reduce sugar production quotas in member states and slash sugar prices by as much as 36% over the next four years. At the same time they established a compensation fund to make payments to sugar producers that surrendered their quotas.

In March, Greencore, the Irish publicly quoted food company that owns Irish Sugar, decided to leave sugar production, blaming the EU reforms for its decision. Its chief executive, David Dilger, said the company had hoped to continue sugar production for another year but decided that it would suffer “unacceptable losses” if it did so. Since that fateful Council of Ministers meeting, Dilger said: “The writing was on the wall for Irish sugar processing.”

Sugar beet production in Ireland can be traced back to 1851 when the Royal Irish Beet-Root Sugar Factory was founded. It closed after 10 years and the state stepped in to set up a sugar factory in County Carlow in 1926. The Irish Government controlled the company up until 15 years ago when it was floated, as Greencore, on the Irish Stock Exchange. At its peak there were four sugar factories in Cork, Carlow, Tipperary and Galway, employing a huge workforce. The latter two plants closed over the last decade and the Carlow factory shut last year.

Many of the more than 300 Irish Sugar workers who will lose their jobs represent the second and third generations of their families to work at the Cork plant.

Ireland’s 3,700 beet growers, who have supplied the factory for decades, are also devastated by these developments and, like Greencore, are looking for compensation.

Both sides have begun to square up to each other in what promises to be a bitter squabble over just how the 148m euros EU compensation available to the Irish sugar industry should be shared.

Greencore says its lawyers have been examining its likely share of the compensation spoils and are satisfied that the company can claim 90% of the total sum, or 131m euros. It says the growers should get the remaining 10%, equal to about 17m euros.

Greencore contends that it will cost the company 168m euros to totally leave the industry, when costs such as decommissioning the plant and redundancy payments are taken into consideration. An EU payment of more than 100m euros would certainly help to ease some of its financial pain.

The growers are appalled at the company’s claim and believe Greencore is not entitled to any compensation. They have been quick to point out that the company, while no longer producing sugar, will be left with two very valuable sites in Cork and Carlow that could fetch about 100m euros if sold for redevelopment.

In their claim to win the lion’s share of the compensation payment the growers have also been highlighting the 300m euros in profits earned by Irish Sugar over the past decade. Last year alone, Irish sugar contributed 25m euros to the group’s 109m euros profit.

The Irish Government has some discretion over how the EU monies should be distributed and is being lobbied by both sides ahead of the scheduled payments due in 2007. Meanwhile, Greencore is in talks with other producers to find sugar to supply its customers when the final stocks of Irish sugar run out in November.

Siobhan Creaton is a journalist at The Irish Times.