January 30 2015 Latest news:
Wednesday, July 23, 2014
UK sugar beet prices are set to fall significantly in 2015/16 against a backdrop of falling commodity prices and high sugar stock levels.
British Sugar, which has plants throughout East Anglia including at Bury St Edmunds, and the National Farmers’ Union (NFU) have agreed a price of £24 a tonne for contract beet - 24% below the current price of £31.67 a tonne.
Farmers are being told that commodity prices have fallen significantly from the peak levels of 12 months ago, including in the European Union. Following a larger-than-anticipated crop last campaign and very good prospects for the crop in the ground now, sugar stock levels have reached an unprecedented high which means the area of planting needs to be reduced for the 2015/2016 campaign.
But the deal between British Sugar and the NFU includes an enhanced transport allowance, which is worth around £1 a tonne, and the company is offering growers a contract holiday, so they can grow less than their quota while still retaining full entitlement for 2016/2017.
The NFU and British Sugar have also agreed to work together on further improving the efficiency of the sugar beet delivery supply chain, and to explore whether a beet pricing option that is linked to the sugar market place could be available to growers in the future. This work should be completed by the end of the year.
“EU sugar sales prices have been falling as a consequence of the exceptional measures taken by the European Commission to increase the availability of quota sugar in the EU, combined with heightened competitor activity as the industry looks ahead to the reform of the sugar regime at the end of September 2017,” a letter to growers explains.
“In light of the extremely competitive market place it is essential we all work together to ensure a sustainable and competitive future for the industry.”
The price achieved is described as “providing a good gross margin for those achieving an average yield, in comparison with alternative crops
at current prices”.
The price for surplus beet will not be announced until nearer to sowing but the letter warns that due to the current levels of excess stock, the surplus beet price is expected to be “significantly below” the price levels in recent seasons.
NFU sugar board chair William Martin, who farms at Littleport, near Ely, and supplies British Sugar’s Wissington plant, described it as “a fair deal”.
He admitted it was a big drop, but pointed out it was in line with the falls seen in other crops.
“We try and be as forceful as we can, but we can’t push water uphill and if markets are against us there’s little we can do,” he said. “Over the last five years it has been below this price only once four years ago. This is the bottom end of the range, but it’s within the range.”
But he added that the crop ‘holiday’ option and transport deal were important concessions for growers. The deal for this year’s crop was reached at a time when commodity prices were much firmer and other cropping options more attractive, he pointed out. The fact that British Sugar was having to cut the national crop by 20% was also an important factor, he added.
He expected that overall growers would be disappointed but realistic about the price drop.
“What I would expect is overall realism. Disappointment that we have not managed to buck the trend more, but realism that this does represent where things are,” he said. “We live in a market economy and this is the market functioning, unfortunately.”