The importance of ethical sugar supply chains

Apr 25 2019

Ethical supply chains mean all actors are paid fairly for their work. At Ragus Pure Sugars, this approach is embedded in how we operate.

What is an ethical supply chain?

 

An ethical supply chain or ethical sourcing refers to a supply chain in which all operators are paid and treated fairly.

Current UK law designed to enforce this is vague at best. The Modern Slavery Act dictates that all companies must write a yearly statement detailing policies, due diligence and the steps carried out to assess and manage risk. Although this is then backed up by global human rights laws, a clear and obvious piece of legislation guaranteeing that the goods we consume are the product of an ethical supply chain is lacking.

 

Why do Ragus Pure Sugars source raw and white sugar ethically?

 

At Ragus Pure Sugars, we believe that sourcing raw materials from an ethical and sustainable supply chain is not just the right thing to do but the only option. Every actor in a supply chain should be treated fairly, benefit from a high quality of life and receive an adequate income. This approach to sourcing has defined our 90-year heritage.

The products we source have often come from areas with historical human rights issues, where labour laws are not as strict as the UK. As such, guaranteeing that we are part of an ethical supply chain is even more crucial, with our decades of experience meaning we have formed supplier relationships in these areas with fairness at their core.

Promoting human rights, anti-bribery, corruption best practice and environmental and social sustainability in these areas is not only the right thing to do but should be commonplace for all businesses.

How do Ragus Pure Sugars ensure an ethical supply chain?

 

For many years, Ragus Pure Sugars has taken steps to be transparent with our customers and we work hard with suppliers to ensure responsibility standards are being maintained.

Alongside the Ethical Trading Initiative (ETI) and SEDEX accreditations, we often visit our suppliers. This includes mills, plantations and supplier brokers, with each being assessed to ensure they all share the same high standards and responsibility values that define operations at Ragus Pure Sugars.

Participating in these food standard accreditation schemes and promoting the profile of the new policies on human rights, modern slavery and bribery outlines our commitment to sustainable and ethical sourcing, meaning that every sugar product that leaves our factory is exploitation and corruption-free.

Contact us to learn more about our approach to CSR or visit our page on the 10 pillars of CSR.

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What is Ragus Sugars’ approach to corporate social responsibility (CSR)?

Apr 05 2019

Corporate social responsibility (CSR) is a core component of Ragus Sugars’ business. Recently we reviewed our strategy and how responsibility underpins our brand.  

 

In 2011 we developed our first CSR strategy that drew together multiple threads of responsibility-related systems and processes already woven into our business operations, marketing and decision making. This led to the creation of our Eight Pillars of CSR, covering core values and activities such as health and safety, quality and sustainability.

Since then we have completed regular reviews of our CSR, seeking always to identify improvements. Our latest 2018/19 review highlights new policies and policy updates that reinforce our ongoing commitment to being responsible.

These include the Bribery Act and anti-corruption initiatives, human rights, anti-slavery and trafficking measures. They ensure every aspect of our supply chain is fair and ethical. As a result, our position on CSR has now become the Ragus Sugars Ten Pillars of CSR.

The most important finding of this review is that responsibility has become so embedded in our business, its strategy and decision making, operations and supply chain that it no longer requires special treatment. For us, being responsible is just business as usual.

 

Ragus Sugars’ Ten Pillars of CSR

 

CSR is fundamental to the Ragus brand and how the business operates, so much so that a separate CSR strategy is no longer needed.

However, we have retained and expanded on our original Eight Pillars of CSR, adding anti-corruption and bribery and human rights as we have created and adopted new policies in these areas. The result is the Ragus Sugars Ten Pillars of CSR:

  1. Health and safety of all our stakeholders
  2. Quality
  3. Employees
  4. Sustainability
  5. Customers
  6. Supply chain
  7. Society
  8. Risk management
  9. Anti-corruption and bribery
  10. Human rights

 

Having embedded responsible and sustainable strategies and practices in our business, we continually monitor our performance. This allows us to identify where further improvements can be made.

 

What CSR accreditations does Ragus hold?

Our internal standards are high, but we don’t measure ourselves. We have invested in gaining multiple international standards and accreditations to ensure we are constantly benchmarked against demanding third party standards, including our customers.

The advanced plant in Slough, England, where we produce our sugars holds accreditations for ISO 9001, ISO 14001, OHSAS 18001, ISO 50001, BRC, HACCP and FEMAS.

In addition, Ragus’ quality control systems have been accredited by UN FAO Sugarmark, and Bonsucro, alongside other leading industry bodies. We are also recognised by SMETA (SEDEX Members Ethical Trade Audit), and are Institution of Occupational Safety and Health qualified, for the health, safety and ethical treatment of all employees.

During 2019, we will evaluate CSR guidance frameworks ISO 26000 and the Global Reporting Initiative, to determine if there are benefits to using reporting frameworks that may better inform our stakeholders about our CSR activities.

Alongside this, CSR is an agenda item at all board meetings, reviewing our whole business from a responsible perspective.

Contact us to find out how you can benefit from our responsibly produced sugars.

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Sugar prices set to rise if no deal Brexit, shows Government Tariff Reference Document

Mar 15 2019

Industrial sugar costs will rise if the UK leaves the EU without a deal on 28 March, as a result of a new post-Brexit tariff regime announced by Government.

 

New post no deal Brexit tariffs increase EU sugar import costs

 

Industrial sugar customers across sectors such as food and beverage, pharmaceuticals, brewing and baking are facing an increase in the cost of some raw materials if the UK leaves the EU on 28 March without a deal.

On 13 March, the Government has published its new tariffs, The Customs Tariff (Establishment) (EU Exit) Regulations, potentially leaving only two weeks for businesses to prepare for the prices changes. And the tariffs are likely to remain in place for only one year, possibly resulting in another tariff and price change end-March 2020.

Tariff cost to industry of £37.5m annually

 

The new €150/t levy on imported white refined sugar for direct consumption, applied because the UK is a deficit sugar market requiring approximately 250,000 tonnes of sugar imports each year, will increase industrial sugar processing costs.

A price increase of this magnitude, which could turn into an annual £37.5m cost rise across the industry, cannot be absorbed by the supply chain, so will be passed on to sugar buyers. This will result in a minimum increase of €150/t for white sugar imported from EU countries.

However, as I write this, MPs have decided that leaving with no deal is not an option and the prospect of an extension is looking possible, adding to uncertainty. An extension could mean this latest tariff notice is irrelevant, but it may be a good indication of what trade negotiators will be seeking out of future trade deals.

Ragus produce a wide range of Pure Sugar products at its world-leading sugar manufacturing site in the UK, including sugars, refiner’s syrups, treacle and Molasses. Ragus’ manufacturing site produces hundreds of tonnes of sugars and syrups each day, all manufactured to the highest quality to ensure customers’ specifications are met.

 

What will be the sugar import tariffs post a no deal Brexit?

 

Should the UK leave on 29 March without a deal, and day-by-day the outcome is looking increasingly unlikely, the new tariffs and resulting price changes will apply after 28 March.

The tariffs on sugar imports into UK for direct consumption will be:

• White refined sugar: €150/t, which is a special tariff as UK is a deficit market
• Raw Cane Sugar €419/t, the default WTO tariff
• Molasses: currently €0/t
• Glucose Syrup: €200/t

Tariffs on sugar imports for refining into white sugar will be:

• Raw Beet Sugar: €339/t, the default WTO tariff
• Raw Cane Sugar: €339/t, the default WTO tariff

The UK would continue trade preference agreements with LDC/LPAs that have existing EU trade agreements.

Who will pay for the sugar tariff increases?

 

In conclusion, the import of white refined sugar to supply the deficit UK market, which is approximately 250,000 tonnes, will go up by €150/t, if imported from the EU, but reduce to €150/t if imported from outside the EU.

Realistically, though, this sugar will come from within the EU. The consequence of this will be that the UK supply chain won’t absorb the resulting additional £37.5m cost of this sugar coming from the EU.

As a result, the UK white sugar market price is likely to increase by a minimum €100/t post-Brexit.

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Brexit blog 2: Will UK sugar price volatility improve post-Brexit?

Mar 07 2019

Post-Brexit tariff-free deals with non-EU countries should reduce UK sugar prices and help calm a volatile market. But only if markets function properly.

Why is the UK sugar price so volatile?
Sugar prices in the UK when buying in sterling fluctuate extensively. For example, over the last 12 months, for some buyers the price of sugar in the UK has changed by 35%. A 35% increase in raw materials costs is a huge deal for our customers, such as brewers, bakers, confectioners, food and beverage producers and pharmaceutical companies.

Sugar is bought and sold within the EU using euros. So, if you are buying in sterling from a euro supplier, the UK price volatility is driven by the euro-sterling currency fluctuations, known as the Unofficial Sugar Conversion Rate, or USCR. The USCR can change every 14 days, depending on underlying exchange rates. If the euro-sterling exchange rate is more than 1% different when compared to the rate two week’s previously, the USCR will change.

UK sugar buyers must then add another €20 per tonne to ship sugar across the Channel – UK prices are always higher than those in continental Europe. In addition, UK buyers and end consumers pay more for sugar cane derived products because of EU tariffs, as I’ve discussed previously.

What can reduce sugar price volatility?
There are dozens of sugar cane producing nations outside of Europe – 80% of world sugar production is by sugar cane producing nations. Theoretically, so many suppliers spread geographically around the world manages risk, as the chances of massive under or over supply are reduced. This level of competition should keep prices down.

This is only in theory. There are, in fact, only two major producing nations: Brazil and India. Nearly half of all sugar production in Brazil ends up being used for ethanol production to fuel vehicles.

India is the largest consumer, so if domestic production is poor, then India not only won’t export, but may well buy up surplus global production. The unique features of these two largest players impact significantly on global sugar market prices and price volatility.

Why has UK sugar cane consumption declined in the last decade?
Because of our history and our existing close ties with many commonwealth nations that are also sugar cane producers, the UK is Europe’s largest consumer of sugar cane derived sugar products. Approximately 25%, or 450,000 tonnes each year, of the sugar we consume is from sugar cane.

Before 2006, the ratio of UK sugar beet consumption versus sugar cane was 50:50, so we imported over a million tonnes of sugar cane each year for UK consumption. Then, in 2006, the EU introduced a 36% cut in prices paid to sugar producers generally, cane and beet. The result of this was huge investment by European sugar beet farmers to improve productivity and output. This massive increase in EU grown tariff-free sugar beet has meant that sugar cane imports have declined.

As I highlighted in my previous blog, How will a no deal hard Brexit affect the UK sugar industry?, if the UK leaves the EU without a deal, or a deal which enables the UK to negotiate its own trade deals with non-EU sugar producers, we should have access to global markets and not be so reliant on the EU’s sugar beet production.

But, as you’ve seen so far, the global sugar market is not quite so simple.

The UK leaves the EU with no deal or a deal allowing third party trade agreements
In a perfect post-Brexit world, the UK can negotiate trade deals with sugar cane producing countries with low or no tariffs. These multiple sources of supply should result in low and stable prices to fill the gap between the UK’s domestic sugar beet supply for white sugar, currently 1.4m tonnes, and current domestic demand of 2m tonnes. Trade deals should also drive down the current cost of sugar cane imports, artificially elevated because of EU tariffs.

But the UK’s sugar market functions as an oligopoly, which means there is limited competition because there are only a small number of refiners. Two to be precise: one sugar beet refiner dominating the market and one that imports sugar cane for refining into white sugar.

Naturally, businesses don’t want prices to go down, and, with so few producers, it is possible for a dominant supplier to effectively dictate sugar prices, whatever deals and fixed prices we negotiate with non-EU sugar producers.

As a result, we are unlikely to experience the full benefits of a post-Brexit world in which we can import tariff-free sugar.

What happens if the UK does a tariff-free Brexit deal with the EU?
Should the UK negotiate a deal that includes remaining in the customs union and single market, little is likely to change. That’s because the UK will continue to take its sugar supplies mainly from domestic sugar beet production and it is reasonable to assume low or no tariff sugar beet imported from the EU.

Sugar cane will continue to be imported but will remain subject to some form of tariffs, quite possibly the same levels of between €90 and €419 per tonne currently in force. The benefits of global tariff-free sourcing from multiple suppliers won’t be realised and the price-volatile USCR will remain.

Back in the early 1990s, we used to set our prices for our customers annually, as the sugar market was relatively stable. Whatever the outcome for sugar post-Brexit, that’s a market state we’d like to see returning so our customers don’t experience huge fluctuations in raw material costs during the year. Such a situation may be possible if the UK can negotiate the right Brexit deal followed-up by free-trade agreements with sugar cane producing nations.

For more sugar market insights and expert commentary, follow us on LinkedIn, Twitter and Facebook.

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Brexit blog 1: How will a no deal hard Brexit affect the UK sugar industry?

Feb 28 2019

Could reverting to WTO rules after a hard Brexit mean lower costs for UK sugar buyers? In theory, yes. But in practice the UK sector’s oligopoly structure means prices could actually increase.

Brexit means the EU no longer negotiates trade deals for the UK
A no deal Brexit means the UK’s sugar industry reverts to World Trade Organization (WTO) rules and tariffs with the European Union (EU) and the 67 countries with which the EU has trade agreements. It also means the UK can negotiate its own bilateral trade deals with other ‘third countries.’

Sugar trade agreements with sugar producing third countries – those outside the EU – have been negotiated by the EU since the UK joined the European Economic Community, the forerunner to the EU, in 1973. Now the UK can negotiate directly with these countries and secure its own terms and tariffs.

To my knowledge, however, sugar is not on the Department of International Trade’s (DIT) radar and has not been part of trade deal discussions with third countries yet. But if we want to sell UK exports tariff free to countries such as Australia, then Australia will want something in return, such as the opportunity to sell its sugar to us, tariff free.

As I discussed in my blog Tariffs on Sugars Explained, tariffs have a huge influence on pricing, increasing the market price by between €90 and €419 per tonne if current rules are applied. So, at the risk of stating the obvious, in theory both producers and buyers globally will benefit from no or low tariff deals.

And the UK is a sugar-deficit market, i.e. we don’t generate enough sugar to supply our demand, and we don’t produce sugar cane at all. Therefore, unless wheat suddenly becomes much less profitable for UK farmers, we will always import some of our sugar. Especially as the UK is one of the largest consumers of speciality sugars based on sugar cane because of its colonial past.

Will sugar buyers benefit from zero tariff bilateral post-Brexit trade deals?
Continuing to use Australia as an example, it currently supplies China’s growing demand for sugar cane. Striking a zero tariff trade deal means Australia could divert its sugar cane exports to the UK.

That’s great for business buyers and consumers. Confectioners and bakers, for example, could see good quality sugar products derived from cane entering the portfolio mix. In theory this would force the price of sugar down because increased tariff free sugar cane exports from Australia, and other non-EU producers, broadens supplier choice for buyers and incentivises cane growers to increase production.
Sugar

I’ve used the word ‘in theory’ twice so far. A tariff free trade agreement with multiple ‘third countries’, including Australia, Jamaica, Brazil and the many other non-EU sugar producing nations should both stabilise and reduce the global commodity price of sugar.

But when you examine the realities of the European and UK sugar markets, this is unlikely to happen. The EU’s trade quotas and tariffs, alongside the UK’s sugar market oligopoly dominated by only two players, means normal market forces won’t work.

This will be the topic of my Brexit blog part 2, publishing next week. Check our blog page or follow us on LinkedIn, Twitter or Facebook to be notified when this is published.

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Tariffs on sugars explained

Feb 22 2019

Breaking down the complex and often confusing world of EU sugar tariffs. What will they mean post-March 29?

What are international trade tariffs?
According to the World Trade Organisation (WTO), tariffs are “customs duties on merchandise imports”. Essentially, a tariff or customs duty is a tax on imported products, usually levied at the border or any other point of entry, such as a port or airport.

So, let’s say you want to buy a car from the USA and import it. There’s a whole range of complicated factors determining how much import duty you pay, but for a reasonably priced modern car the UK’s tax and customs agency, HMRC, will demand a 10% duty in addition to 20% VAT on top of the car’s value.

Why do countries impose tariffs on imports? Generally, tariffs are imposed for two reasons:

1. To protect a domestic industry from global competition by making imported goods more expensive

2. To generate tax revenue.

While the UK is part of the EU, imports, including sugar, from EU counties have no tariffs. But if you import sugar from outside the EU, when the UK leaves the EU you will probably pay import duty and it could double the cost of your sugar, if there is no deal with the EU 27.

How EU sugar tariffs work
As the UK is currently part of the EU, we’re subject to EU rules. That will change after Brexit, but we don’t yet know how.

The rules on sugar tariffs depend on several variables, such as the country of origin of the raw material – sugar cane or sugar beet – who produces it, a mill or refinery, and whether it is for direct consumption or additional refining. Getting it correct is important because getting it wrong can be expensive: tariffs vary between €419 and €90 per tonne.

The basic tariff for importing direct consumption sugar into the EU is €419 per tonne. So, every tonne of sugar imported from a non-EU country costs an extra €419. Raw sugar imported into the EU is to be further refined into white sugar attracts a tariff of €339 per tonne.
Pure sugar produced by Ragus. Ragus is one of the world's leading pure sugarmanufacturers. It sources raw sugar from across the world to manufacture sugars, syrups and special formulations from its advanced UK factory. Ragus ships its sugars globally, delivering on-time and in-full to customers across the brewing, baking, confectionary, and pharmaceutical industries

Except not every non-EU country pays the above tariffs. The EU also has what it calls its preferential tariff structure. The import duty for raw sugar is only €98 per tonne if imported from a ‘CXL’ country, which includes Australia, Brazil, Cuba and India. But only for sugar destined to be refined into white sugar.

Least Developed Countries (LDC) and African, Caribbean and Pacific (ACP) countries trading under Everything but Arms (EBA) have unrestricted, tariff-free imports of raw sugar into the EU.

If things weren’t complicated enough, if a mill outside of the EU is producing raw sugar which it sells as, for example, brown sugar for direct consumption, then it pays the full €419 per tonne tariff.

My message to you – don’t try this at home!

How is a sugar mill different from a sugar refiner?
Another complication when trying to work out what tariffs apply to sugar is whether it has been produced by a sugar mill or a sugar refiner. If you look at the different tariffs above, this distinction is more than just semantics; it has a major impact on the tariff.

A sugar mill crushes, or mills, sugar cane, extracting the juice from the cane which is then boiled down into crystalline brown sugar. Molasses is left as a by-product of the process.

Pure sugar produced by Ragus. Ragus is one of the world's leading pure sugarmanufacturers. It sources raw sugar from across the world to manufacture sugars, syrups and special formulations from its advanced UK factory. Ragus ships its sugars globally, delivering on-time and in-full to customers across the brewing, baking, confectionary, and pharmaceutical industries

What will Brexit mean for sugar tariffs
Imports and exports between EU member states while the UK is part of the EU are tariff-free. Imports into the UK, such as sugar cane, from non-EU countries attract duties, as I’ve explained above.

When the UK leaves the EU, there could be several outcomes for sugar duties, depending on whether there is a deal, or the UK leaves without a deal. We will be discussing the possible outcomes for international trade in sugar in our next two blogs, so make sure you visit our blog page next week or follow us on Twitter or LinkedIn.

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