Rating Manual section 6 part 3: valuation of all property classes

Section 100: beet sugar factories

This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.

1. Scope

This section applies to purpose built sites which produce sugar from sugar beet with associated by-products of animal feeds and molasses. All of the factories are owned by British Sugar, which was established in 1936. It is not applicable to Sugar Cane Refineries which are valued by the indirect rentals method.

2. List description and special category code

List description: Beet Sugar Factory and Premises IF

SCAT code: 023V.

3. Responsible teams

Responsibility for the valuation and referencing of this class of property lies entirely with the Industrial and Crown Team within the National Specialists Unit (NSU).

4. Co-ordination

Responsibility for ensuring effective co-ordination lies with the NSU.

The EU sugar regime was started in 1968 as part of, and with similar aims to the Common Agricultural Policy (CAP). Due to Europe’s Colonial ties, the Sugar Regime was developed with a group of African Caribbean Pacific (ACP) countries, in order to ensure a stable supply of sugar to the EU. It was criticised however for having high guaranteed internal prices, quotas, tariffs, export subsidies and preferential access to EU markets for ACP sugar producers which led to high prices, over-production and distortion of the world market. The “Everything But Arms” agreement which gave enhanced access to the Least Developed Countries (LDC) and a WTO ruling against the regime led to a major reform in 2006. The details of the Reform and proposals are contained within the following document.

Details of the EU Sugar Regulations 2006

Key elements of the 2006 reform

  1. Price Reduction: the reference prices for sugar and the minimum prices for beet growers were substantially cut over the period 2006–10 (the reference price for white sugar was cut from €631.9 per tonne to €404.4 and the minimum price per tonne of quota sugar beet was cut from €44.01 to €26.29)

  2. Production quota reduction by 6 million tonnes

  3. A temporary restructuring scheme was set up, financed by manufacturers and aimed at encouraging the least efficient to renounce their production quotas voluntarily

  4. Partial compensation for farmers

  5. End of preferential imports to traditional cane refiners (such as Tate & Lyle Sugars), along with transitional aid over the period 2006–09

  6. Exports of non-quota sugar limited to 1.37 million tonnes

Across Europe between 2006 and 2011 almost 6 million tonnes of sugar production was removed (the total EU production quota for sugar in 2013 was 13.3 million tonnes) with the closure of 60% of the EU sugar factories.

In June 2013, The European Council of Ministers confirmed that existing quota arrangements would continue until 30 September 2017 when sugar quotas for domestic production would end. Tariffs for sugar imports into the EU are not affected. British Sugar parent Company state in their Audited accounts 2013 that this change should encourage growth in EU production by the most efficient producers of sugar and isoglucose.

6. Survey requirements

Basis of measurement for Beet Sugar Works is GIA

6.1 Safety on site

  • All Beet Sugar works contain serious safety hazards, so extreme care is required when carrying out inspections
  • Caseworkers visiting this type of property for an inspection or other reason should wear the appropriate PSE, and ensure they are aware of all the VOA guidelines on health and safety. Minimum requirement: - safety boots and glasses, high viz clothing and hard hat.
  • Sites will have a formal health and safety induction process, this must be undertaken and allowed for when fixing appointments. Individuals should comply with all safety rules and precautions prescribed by the site operator without exception.
  • In particular, it is important to maintain very high levels of awareness - be alert for the risk of trips and falls; never touch exposed pipes or other elements of production equipment particularly those with moving parts such as beet conveyors.

6.2 The hereditament

The majority of beet sugar factories were built between the years 1921 and 1928 and in general comprise a main process building of substantial and lofty construction together with ancillary buildings of typical factory/warehouse construction. The main building is tall and contains staging, gantry floors, platforms and supports for plant and machinery. The ancillary buildings will include workshops, warehouses, offices, boiler houses, large concrete sugar silos and often purpose built bulk out loading facilities.

By the addition of Combined Heat & Power (CHP) British Sugar have reduced their energy consumption per tonne of product by 25% since 1990. In addition to exporting some energy to the grid, the sites generate a range of co products including animal feed, topsoil and biofuel, as well as waste heat, which is used to heat glass houses close to the Wissington plant for growing tomatoes.

Site works are usually extensive and of a specialist nature and comprise large flat pad beet storage areas with inset wash ways and elevated flumes, large mild steel juice tanks, settlement ponds and effluent disposal plants.

Product is now received and despatched only by road.

The manufacturing process can be considered in two stages. The front end takes raw beet and after a series of processes produces thick juice. This occurs during the ‘campaign’ months of September to February. The back end known as the ‘’juice run’’ converts thick juice into sugar crystals and now occurs all year round thus improving the asset utilisation. The UK beet sugar factories produce over 1m tonnes of sugar annually and are some of the most efficient in the world.

6.3 Background – how a beet sugar factory operates

Sugar beet is brought to site, weighed, sampled and laid on large flat concrete storage areas. When required for processing, the beets are carried along flumes by running water which cleans the beet as it passes through machinery which separates soil, stones, weeds and other foreign matter before entering the factory.

The clean beets then pass through machines which cut them into thin ‘V’ shaped slices called cosettes. The cosettes are transferred by belt conveyors to horizontal or vertical rotary diffusers. Horizontal diffusers are large drum type vessels which rotate slowly and through which the cosettes are passed with a contra flow of hot water. Vertical diffusers are similar but rotate within a fixed outer casing. In the extraction process the water passes through the cells of the cosettes and extracts the soluble sugar.

Having given up its sugar content the spent pulp is pressed to remove surplus water and conveyed to dryers that evaporate the remaining moisture. Molasses may be added to the product which is then bagged or compressed into blocks or pelletised and sold for cattle feed.

After leaving the diffusers the raw juice is subjected to a series of purification processes, the first of which takes place in carbonators where the juice is heated to about 85° centigrade. Milk of lime is added and carbon dioxide is then pumped through the liquid causing a flocculent precipitation which removes the impurities. The liquid is pumped to a ‘Dorr’ clarifier where the impurities settle out as sludge and the clear liquid passes to a second carbonator for similar treatment but without the addition of lime. It is then filtered. The lime and carbon dioxide required for this process are produced generally in kilns on the hereditament.

If the factory is producing white sugar the juice is passed through a sulphitation tank for sulphur dioxide treatment, a process which removes the lime residue from the juice.

The liquor, which at this stage is known as thin juice, is pumped to a battery of evaporators where the water content is reduced so that the solid contents in the juice increase from 16% to 65%. These evaporators are used in series and the vapour given off in each vessel is used to heat the juice in the next. This concludes the front end of the manufacturing process and plant and buildings associated with the above are utilised for only part of the year.

‘’Juice run’’- back end of the manufacturing process.

So that production of sugar may be spread throughout the year, all factories now have thick juice tanks. These hold some of the thick juice from the evaporator until required.

Sulphitation is then be repeated before the juice is further concentrated by boiling in vacuum pans. When the juice reaches a predetermined concentration it is ‘seeded’ with tiny sugar crystals which provide the nucleus for larger crystals to form and grow. When the crystals reach the desired size the process is stopped and resultant mixture of crystal sugar and syrup - known as massecuite - is spun in centrifuges to separate the sugar from the ‘mother liquor’.

The crystals are dried and cooled ready for bagging or storage in the large concrete silos.

Meanwhile the sugar which remained in the separated liquid/ syrup is re-boiled in a further set of vacuum pans to produce a raw (or slightly coloured) sugar. This is repeated a third time resulting in final product of sugar and molasses. Raw and final product sugars are redissolved into the thick juice.

6.4 Plant and machinery

See Rating Manual section 6 part 5 for general advice on identification of rateable plant and machinery forming part of the hereditament. Rateable plant and machinery is identified in accordance with the provisions of SI 2000 No. 540 in England and SI 2000 No. 1097 (W.75) in Wales.

Beet Sugar Works contain some uncommon items of plant and machinery such as rotary and vertical diffusers, lime kilns, along with a series of underground and overhead beet flumes. Costs for these can be sourced from the NSU Industrial & Crown Team as they do not form part of the Rating Cost Guide.

7. Survey capture

Survey data for Beet Sugar Works is recorded manually in binders in the custodianship of the NSU’s caseworker support team.

8. Valuation approach

The primary method of valuation for Beet Sugar Works is the Contractor’s Basis – this reflects the highly specialist nature of the occupation. It will incorporate a significant proportion of rateable plant and machinery and this is likely to include specialist process plant.

9. Valuation support

Valuations for beet sugar works are held on the Non-Bulk Server (NBS).

Practice note 1: 2017 - beet sugar factories

1. Market appraisal

This guidance applies to purpose built sites which produce sugar from sugar beet with associated by-products of animal feeds and molasses. It is not applicable to Sugar Cane Refineries which are valued by the indirect rentals method.

All of the factories are occupied by British Sugar plc which is a wholly owned subsidiary of Associated British Foods plc (‘ABF) and publishes its own Annual Report and Financial Statements. ABF Annual Report and accounts group British Sugar trade with Sugar business in Europe, China and Southern Africa under the AB Sugar Group.

The Chairman’s statements in the ABF 2014 Accounts state ‘‘The results of our sugar operations reflect a major fall in EU Sugar prices and a very low world sugar price. Looking back to 2011/12, a shortage of sugar available for sale in the EU and relatively high world prices at the time drove EU prices to very high levels which clearly benefited our Sugar profit in that year. This was exceptional. Since then more sugar has become available, sugar stocks in the EU have risen, the European Commission has confirmed the abolition of sugar quotas from October 2017, and world sugar prices have declined dramatically. We have seen increased competition as European producers position themselves for a post-quota market. This has driven a fall in prices which we expect to continue in 2015. We anticipate restructuring in the European sugar industry and, as the high stock levels are liquidated, we expect to see volatility in market prices. This structural change is painful, but AB Sugar has risen to challenges of this nature before, and does so this time with a programme of continuous performance improvement. We are one of the most efficient producers in the EU and will continue to take the necessary action to ensure that we are well placed to operate in the post-quota environment’’

‘’British Sugar produced 1.32 million tonnes in 2013 of sugar compared with 1.15m tonnes in 2012. Good growing conditions extended into the mild winter resulting in higher beet yields and sugar content than 2012. The crop for the 2014/15 campaign has benefitted from excellent growing conditions, with every indication that it will be much larger than 2013/14. The new campaign has started well with production ahead of schedule and with Newark and Wissington exceeding daily beet throughput records. This larger crop will provide the opportunity to confirm our ability to process the higher volumes that we expect to become the norm in a post-quota environment. The beet price payable to growers for 2014/15 crop was agreed in summer 2013, at a substantial increase over the price for year under review(2013/14), and at an increased cost to British Sugar of some £30m. Negotiations for delivered beet costs for the 2015/16 campaign have now been concluded with a reduction of some 20% on the previous year. This will make a major contribution to ensuring a more sustainable UK beet sugar industry reflective of the new commercial environment for EU Sugar’’

Year-end September 2006 £ 2007 £ 2008 £ 2009 £ 2010 52 wks 2011 £ 2012 £ 2013 £ 2014 £
Turnover £m (Sugar) 749.6 649.7 692.3 742.1 781.9 829.4 1050.5 1043.2 851.1
Cost of sales £m 607.7 449.2 536.3 560.5 513.6 534.5 613.6 625.4 577.9
Gross profit £m 141.9 200.5 156.0 181.6 268.2 294.9 332.1 417.8 273.2

2. Changes from the last practice note

There was no practice note for the 2010 rating list.

3. Ratepayer discussions

There have been no discussions with the beet sugar industry.

4. Valuation scheme

There is no scheme of valuation as Beet Sugar Factories are valued by a limited number of specialist caseworkers who are part of the Industrial and Crown Team of the National Specialist Unit. The properties will be valued using the Contractors Basis of Valuation with the majority of costs being derived from the Valuation Office Rating Cost Guide. Costs of more specialist buildings and plant and machinery, which are particular to Beet Sugar Factories, and are not the subject of Cost Guide entries, will be provided separately.

Appendix 5: beet sugar factory production flow diagram

Flow diagram simplified