Cheap Sugar Hits Czech Producers Hard: One Factory Already Closed

Czech sugar producers are going through tough times as prices plummet: over the past two years, the cost of their product has dropped by nearly half, and one factory has already shut down. According to Josef Pojer, chairman of the Czech-Moravian Sugar Beet Growers' Union, the industry's most immediate threat isn't a shortage of raw materials—it's the economics of production itself.

According to the Czech Statistical Office, in December 2022 the average price of a kilogram of crystalline sugar hit a record 32.23 crowns, but a year ago it had already fallen to just 15.25 crowns. Data from the Kupi.cz portal shows that sugar on sale currently goes for roughly the same price, but it still hasn't returned to pre-crisis levels. Purchase prices for producers themselves have fallen even more sharply—this spring, in the Czech Republic, Germany and Poland, they dropped to around 12 crowns per kilogram.

Rising Costs, Falling Demand

Meanwhile, factories are paying ever more for energy, packaging and labor, and because sugar production is so energy-intensive, they're also subject to emissions quota requirements. "In this sector, the scissors have long been open—prices are stagnant or falling while all the costs keep climbing," said Marek Zemánek, a representative of the Czech Food Chamber.

Sugar is made from either sugar beet or sugar cane—beet dominates in the Czech Republic and Europe, while cane is more common globally, though the final product is chemically identical either way. The Czech Republic has favorable conditions for growing beet and has traditionally produced sugar not just for the domestic market but for export as well. From last autumn through this February, six Czech factories produced 589,000 tonnes of sugar—three-quarters more than the country consumes in a year. Tereos TTD's plants in Dobrovice and České Meziříčí alone churned out 354,000 tonnes.

Consumption, meanwhile, is on the decline: people are opting for less sugary products, and companies are partly replacing sugar with other sweeteners. In the Czech Republic, per capita consumption fell from 36.9 kilograms in 2022 to 30.8 kilograms two years later. At the same time, sugar supply in Europe has actually increased thanks to good harvests and rising imports from Ukraine—after quotas were lifted in 2022, shipments reached half a million tonnes a year. Since last year, Ukraine has been able to export up to 100,000 tonnes to the EU duty-free.

One Factory Already Closed, Another at Risk

Czech sugar production has a history spanning nearly two centuries and flourished as far back as the Austro-Hungarian era in the 19th century, when local sugar was so economically important it earned the nickname "white gold."

Until quite recently, the country had seven sugar factories in operation. Last year, the company Agrana closed its plant in Hrušovany nad Jevišovkou, along with a factory in Austria—not due to bankruptcy, but as part of a consolidation of production at fewer sites amid low prices, rising costs and falling demand.

According to the sugar producers' union, twenty beet-processing plants have closed across the EU since 2017. Industry experts warn that the closure of yet another Czech factory could trigger a chain reaction: the distance beets must travel for processing would grow longer, farmers' costs would rise, and some would abandon the crop altogether.

"If low prices and high inventories persist, the risk of one of the six remaining Czech factories closing could become a reality," Pojer warned.

Source: novinky.cz