Turkey is the largest beet sugar producer in the Middle East and fifth largest beet sugar producer in the world, ranking only behind France, Germany, the United States and Russia. With a population approaching 75 million, Turkey also is a significant sugar consumer. The sugar sector is highly regulated and subsidized, but this will change in the coming years when Turkey accedes to the European Union and adopts the EU sugar policies.
Production Based on Quota System
According to the nation’s Sugar Law established in 2001, up to 2008/09 Turkey’s sugar production quota was set at 2.34 million (metric) tons, although actual year-to-year production was dependent on area planted, the level of input use and growing conditions. For 2008/09, the production quota was raised to 2.4 million tons, but actual production was only 2.1 million tons. It was raised again to 2.44 million tons in 2009/10, with actual production reaching 2.53 million tons that year.
Of total 2009/10 production, 1.53 million tons were from state-owned and privately owned plants, and 1.0 million tons came from cooperative sugar plants (Pankobirlik). For 2010/11, reflecting high yields the year before and excess supply, the quota was reduced to 2.20 million tons; but actual production is expected to be 2.4 million tons. According to industry sources, Turkey’s total sugar production capacity is 3.2 million metric tons.
The “A” production quota is determined annually by the Sugar Board, with oversight by the Ministry of Industry and Trade, according to domestic sugar consumption needs. The Sugar Board has seven members: four government officials and one representative each from the state-owned Turkish Sugar Corporation (TSC), Pankobirlik (the producer cooperative) and starch-based sweetener producers. The quota distributed to state and private companies is based on their performance during the previous three years. In turn, farmers contract with beet refineries to process their output at a set procurement volume and price.
There also is a “B” quota, which is a small amount produced as a margin. Lastly, there is a “C” quota, which consists of production that can not be marketed domestically. The “C” quota sugar is sold at world prices and is only utilized in sugar-containing products that are exported.
There are 33 sugarbeet refineries in Turkey and six starch-based sweetener producers. The state-owned sector owns 25 of the sugarbeet refineries, while the remaining eight are privately owned. Many of the state-owned factories operated by TSC were opened in areas with high unemployment, and the government has further supported the state sector with high procurement prices.
Sugarbeets are produced mainly in the Central Anatolian region of Turkey, with the leading producing provinces being Konya, Eskisehir and Atyon. (See map on next page.) Harvested area has averaged 340,000 hectares (about 840,000 acres) annually over the past decade. Area in 2010/11 is expected to contract down to 300,000 hectares due to the decreased production quotas and the high amount of carry-in stocks to the new year.
The Sugar Board estimated the number of sugarbeet farms in 2008 at 209,000 and placed it at 187,937 in 2009. While the number of beet farms has decreased, yields have increased because of the use of more-modern agricultural technologies, including irrigation. For 2009/10, beet yields were at record 53 metric tons per hectare (the approximate equivalent of 23.6 short tons per acre), compared with the previous nine-year annual average of 41 tons (about 18.3 short tons per acre).
According to Pankobirlik, the sugarbeet producers’ cooperative, beet yields during the past five years have varied between 38 and 52 tons per hectare, depending on region and weather conditions. In contrast, in the Konya region, yields have been running between 55 and 60 tons per hectare, reflecting that region’s use of better machinery, irrigation and improved crop husbandry.
Sugarbeets in Turkey are generally grown in a three- or four-year rotation with cereals, pulses, fodder crops and sunflower. Planting begins in February and continues through May, with the harvest from late July to November.
For marketing year 2009/10 (Sept.-Aug.), Turkish sugarbeet production was the highest in nine years, owing to favorable weather conditions and expanded harvested area. Total harvested area was 324,000 hectares, yielding an estimated 17.27 million metric tons of beets. Beet sugar production for 2009/10 was 2.53 million tons. The forecast for 2010/11 is 14.0 million tons of beets yielding 2.4 million tons of beet sugar — a reflection of reduced area and more-normal weather conditions.
The state-owned Turkish Sugar Corporation and private producers, wholesalers and retailers handle the marketing of sugar. Industry sources place consumption of sugar at 2.8 million metric tons, well above the amount of sugar produced. With a population of 72.5 million (75% of which is urban), an estimated 38-kilograms-per-person use rate and a population growth rate of 1.3%, Turkish sugar consumption is trending upward. To meet demand, out-of-quota sugar is sourced from across Turkey’s southern border.
According to Turkish law, the maximum amount of sugar a “passenger” or “tourist” can bring across the border is 75 kilograms; but some “passengers” cross the border several times a day and bring 75 kilograms each time. This adds up to an estimated 200,000 tons per year and is supplemented by sizeable smuggling operations from countries on Turkey’s southern border, most notably Syria.
Beet molasses — the byproduct of sugarbeet processing — is used in animal feed and in the production of yeast and alcohol. A small quantity is sold to neighboring countries.
Trade Continues To Be Small
Owing to the high internal price of sugar and the lack of export subsidies, Turkey’s sugar exports are small — an estimated 40,000 metric tons in 2009/10 and 2010/11. Azerbaijan is the primary destination. Manufacturers of sugar-containing products for export can buy “C” quota sugar at world prices. “C” quota sugar has been selling for $594 per metric ton (27 cents/lb), whereas “A” quota sugar is selling for $1,310 per ton (59 cents/lb). Manufacturers can also import sugar duty-free for the products used for export.
In the early 2000s, to minimize the cost of maintaining large inventories, the TSC began exporting large quantities of sugar. The significant difference between domestic beet sugar producer prices and world market prices resulted in huge losses, which were supported by the Turkish Treasury. These subsidized exports were ended in accordance with Turkey’s economic reform program and IMF agreement.
The tariff rate on sugar imports is 135%, and the volume of imports is negligible. Though Turkey has a trade agreement with Bosnia-Herzegovina that allows duty-free imports of sugar, there is no significant volume of sugar trade between the two countries. Duties on sugar-containing-product imports such as candies and chocolates vary between 8.3 and 15.4%.
Policy Initiatives Underway
Currently, there is also an effort in Turkey to find new uses for sugarbeets, mainly bio-ethanol. The Konya Sugar Company has built an ethanol plant at Cumra. This is the first and only ethanol factory in Turkey. Ethanol production started in 2007, and the plant has the capacity to process 800,000 tons of beets annually and produce 80,000 cubic meters of ethanol.
In response to pressure from the IMF and the EU, the Turkish government has initialed a privatization program. Three government-owned refineries were privatized in 2004 and 2005: Kutahya, Adapazari and Aksaray. Three others — Ilgin, Bor and Eregli — were to be privatized in 2006, but there were no bids by the private sector, reflecting the low capacity of those three factories.
In 2007 the privatization efforts for the government refiners was transferred to the Privatization Administra-tion. In 2008 the Privatization Administration released a list of factories by group:
A — Kars, Ercis, Agri, Mus and Erzurum
B — Elazig, Malatya, Erzincan and Elbistan
C — Kastamonu, Kirsehir, Turhal, Yozgat, Corum and Carsamba
D — Bor, Ergli and Ilgin
E — Usak, Alpulu, Burdur and Afyon
F — Eskisehir and Ankara
The factories in group A, located in eastern Turkey, did not get any bids from the private sector in 2008, reflecting their low capacities and inefficient operations. The bidding process was again canceled in 2009.
TSC factories are widely known to be plagued with production inefficiencies and old technology. However, anti-privatization spokesmen assert that once these plants are privatized, only a few profitable refineries will survive and the rest will be shut down, causing a spike in unemployment.
In the long run, the government expects the sugar sector to become more efficient once privatization is completed. Currently, sugar prices in Turkey are far above world prices because of government protection and outdated technology in the state-owned plants.
Turkey plans to join the EU in 2014. As a result of joining the EU, the Turkish government plans to bring its sugar polices more in line with the new sugar policies of the EU — including a drop in sugarbeet procurement prices.
Turkey’s aim is to adopt the EU’s basic system of nation law and regulations. Implementing elements of the EU regime will be difficult — especially the foreseen spike in rural unemployment. However, their adoption will make a significant contribution to modernizing the agricultural sector and the nation’s entire economy.
* Peter Buzzanell is director of Virginia-based Peter Buzzanell, LLC. Prior to his retirement from USDA, he was head of the Sugar & Sweetener Analysis Unit at that agency’s Economic Research Service. The author wishes to thank the office of USDA’s agricultural counselor in Istanbul for its assistance in preparing this article.
Editor’s Note: Peter Buzzanell also authored the article in The Sugarbeet Grower’s November/December 2010 issue titled “EU-27 Beet Sugar Industry: Charting a New Course.” Due to a printing error, his name was inadvertently omitted.