EU reform clouds future for Finnish sugar farmers

The sun shines hotly on tidy rows of sugar beet on the Korsimo family's farm in southern Finland but a sugar reform proposal due from Brussels tomorrow is a dark cloud that could wipe out the future crop.

"If sugar prices drop 40 per cent, we're ready for the slaughter house. That would mark the end of sugar production in Finland," says Jaakko Korsimo, 57, who has farmed sugar for 34 years and recently shifted responsibility to his son, Jari.

"I want to continue farming," says Jari, 28. "But this would be quite a bomb. Many young people have counted on suger when deciding to become farmers."

Finland's sugar industry, like that of the entire European Union, is heavily subsidised and the EU's sugar regime, barely altered since its birth in the late 1960s, now inflates internal prices to more than three times those on the world market.

The World Trade Organisation rapped the 25-nation bloc last month, declaring many of its sugar exports illegal. The European Commission is due to issue its formal reform proposal tomorrow. This will then be discussed by EU agriculture ministers.

The proposal is expected to recommend cutting the EU's white sugar support price by 39 per cent and the minimum beet price by 42 per cent, with both cuts implemented over two years.

"In the Netherlands farmers can grow flowers, in France they can grow corn. But our plant portfolio is limited, so this would be a very hard blow for Finland," said Pekka Myllymaki, chairman of the National Sugar Beet Committee and a sugar farmer himself.

One option is to shift to feed grains, like barley, but there is already overproduction and prices are low.

"These are the best fields in Finland. Of course they can be used for something else, but what would that other use be if it is to bring a similar income level?" a ministry official said. "Alternate crops are not a financial option for these farms."

Due to Finland's northern location the growing season is short, meaning crop yields are relatively small and the proportion of fixed investments, for example into highly specialised machinery, is high.

Finland is by far the smallest sugar producer out of the Nordic EU countries, and could be hit hardest by the reform. The climate is more favourable in Sweden and Denmark, and their stance on agriculture is more liberal.

Still, in Denmark, home to the region's major sugar company Danisco, as many as 50 per cent of sugar beet farmers could be knocked out and opt for alternative crops, the Danish Sugar Beet Growers' Association estimates.

"We support the reform and realise that prices must drop, but believe higher compensation for farmers is necessary," said Claus Sorensen, the association's secretary general.

Finnish farmers agree, saying the Commission's proposal of compensating 60 per cent of income lost due to higher prices is insufficient. Lost production must be compensated for in full.

Finland argues that if the EU allows sugar production to wither away in relatively inefficient member states, this would mark a shift in policy, which has thus far sought to enable agricultural production in all parts of the union.

"Cuts affect everyone when necessary. But for something to be destroyed in a member state through common action - this has never happened before," the ministry official said.

"If the Commission has changed the way it operates, we face a much bigger question than just sugar."

Without subsidies, European producers are unable to compete with sugar cane on global markets, and Finland says it is unfair to subsidise only the biggest and most efficient players like France and Germany.

"The proposal still includes EU subsidies, but the subsidies would just focus on countries like France. What is on offer is not a liberal market system," Mr Myllymaki said.

Finland's sugar production quota under the current scheme is 146,000 tonnes and accounts for about two-thirds of national consumption with the rest imported mainly from poor countries.

"Our starting point is that we have in no way contributed to the need for reforms, caused by structural over-production in the EU," said Vesa Kurula, head of Finland's only sugar company, Sucros, owned 80 per cent by Danisco, and 20 per cent by Finland's Lannen Tehtaat.

"Finland's own production in relation to imports from the least developed countries is already at a level where others should be. We feel that this is not our problem and we expect a solution that is reasonable for us," Mr Kurula said.

The Korsimos, like many others in Finland's sugar industry, worry about the threat of losing a strategic food crop as well as the century-old tradition and regional jobs that go with it.

"What to do if sugar production ends - that's the million dollar question," Jaakko Korsimo says. "Perhaps there's room for yet another golf course in this region."