Profitability Development and Resource Reallocation: The Case of Sugar Beet Farming in Germany

Abstract

Following the 2006 reform of the European Union sugar market, and in anticipation of the quota abolition, a reallocation of sugar production has occurred. Using a Lowe quantity index, we evaluate the productivity and profitability of sugar beet farming in Germany from 2004 to 2013. The results show that an increase in total factor productivity partly compensated for losses in terms of trade. Moreover, the contribution of production reallocation to sector productivity growth varied across regions with distinct ownership structures of sugar processing companies. These findings have implications for policy and industry, as it transitions to a liberalised market.