19 October 2020
‘Pay by Sugar’ - A powerful way to improve grower’s income and competitiveness of the China beet sugar industry
A blog from AB Sugar China’s Managing Director, Tony Cheung
With the landscape in China evolving since my last blog, including pressures around rising sugar beet planting costs, low international sugar prices, the global sugar industry being under pressure; the need is even greater to develop further our approach with our growers so we continue to make a significant social and economic contribution to the communities we operate in.
I wanted to share with you the journey AB Sugar China has taken over the past two years to further consolidate our position within the Chinese beet sugar industry. We’ve implemented new ways of grower partnerships, invested in our operations, and continued to look at reducing our impact on the environment by creating more from less with our growers by developing productive crops year-on-year.
A new way of partnership
One of the steps taken has been our introduction of the Pay by Sugar (PBS) model, which sets us apart from others within the Chinese industry. Traditionally, our growers have been paid per tonne of sugar beet, with no adjustment for the sugar content in the beet. Therefore, reflecting models outside of China, we have moved to PBS where our growers are paid a headline price per tonne of beet which rewards them for developing their agronomy practices by improving their yield and sugar content, thus crop profitability. In tandem, for us, helps to drive down our costs of production by having improved beet quality and operational efficiency at both our factories.
In 2020, we set an ambitious target of having 100% of our large growers contracted to PBS by the end of 2021/22. We are currently ahead of target with 77%. This demonstrates the level of confidence in this mutually beneficially partnership as together we are improving agronomy practices resulting in the reduction of fertilizer applications that are not detrimental to crop quality and generating more from less that rewards hard work and dedication. All bodes well for our ambitions of improving the competitiveness of the Chinese beet sugar industry through education, technological advancements and competitiveness.
Moving forward, we aim to increase further agricultural knowledge, yield improvements, profitability and crop management, all helping us to have more sustainable methods and helping us advance our market position.
Technology as a driver moving forward
As a key contributor to the success of the Chinese beet sugar industry, we want to leverage technology to progress further at speed the ability to be more profitable and efficient and support the role towards mechanization. So far, technology has been one driving factor behind our continued growth. The size of our mechanised growing area in the North has grown from 11% in 2010, to over 70% in 2017/18, and today sits at 95%. Simultaneously, we have consolidated our grower base, while boosting yields by over 69% since 2011, from 2.18t/mu to 3.68t/mu, a growth of 69%.
In 2018, I set out our ambition that “We will continue to contribute to the improved efficiency of the industry, while decreasing our own footprint and delivering strong returns on investment.”
We are looking to capitalise on our success by implementing significant investment to build sampling and laboratory testing facilities at both our Zhangbei and Qianqi factories, as well as investing further in our water extraction management, with over 50% of the land being drip-irrigated. Not only do these investments embrace technological developments but also embraces conservation. The reduction of water extracted in our fields and energy in our factories, will support our contribution to AB Sugar Group’s overarching 2030 commitments to reduce our end-to-end supply chain water and CO2 footprints by 30%.
Looking to the future
We have already seen over the past two years our joint efforts with our growers has made sugar beet a more competitive crop to grow. I’m therefore extremely pleased that both our growers and AB Sugar China have been recognised recently by the *China Sugar Association with their ‘Innovation Award’ for the implementation of PBS in recognition of the contribution we are making towards the Chinese beet sugar industry competitiveness on the global sugar market and the alignment of interests of both growers and processor.
Looking at the future, we shall continue to drive more efficient farming techniques and lower the cost of sugar production within our factories to realise our simple, yet powerful vision to be China’s leading beet sugar business.