Growers’ anger as beet price drops
14:00 26 July 2014
East Anglian sugar beet growers have expressed anger and resignation at a deal which will see crop prices fall significantly next year.
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 in 2015/16 - 24% below the current price of £31.67 a tonne - against a backdrop of falling commodity prices and high sugar stock levels.
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 despite the current surplus, growers have warned that the company could see a shortfall if more farmers than expected decide to turn their backs on the deal.
The agreement 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, but growers are still unhappy.
John Collen, who grows around 3,000 tonnes of beet at his farm at Gisleham, near Lowestoft, said he was unlikely to grow the crop next year and was currently looking at alternatives. He argued that the potential damage to the soil and to the yields in follow-on crops should be reflected in the price and added that farmers were feeling “very, very bruised”.
“It’s an appalling deal,” he said. “I have yet to find anybody who thinks this is anything but a kick in the teeth.”
He added: “I can’t profitably grow beet at £24 a tonne myself. Some of the best land that grows 80 plus tonnes per hectare of beet might be able to make it stack up.”
Bill Baker, who farms at Drinkstone, near Bury St Edmunds, who grows about 350 acres of the crop, said he was “disappointed” but would be “doing some sums”. He expected to continue to grow sugar beet next year, although possibly on a reduced scale. Overall, with the transport agreement, he believed it would represent a drop in price of 21% which was about in line with the fall in prices of other crops.
“All the trump cards are with the purchaser,” he said. “I’m unhappy about the price drop. I’m unhappy about the price drop in all commodities, but you have to be realistic.”
The NFU and British Sugar have 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.”
Colm McKay, agriculture director at British Sugar, said: “We are pleased that after months of detailed discussions with the NFU, we have reached agreement on the terms and conditions for the 2015/16 beet crop. The package of proposals demonstrates both British Sugar’s and the NFU’s continued commitment to work together to deal with the challenges the industry is facing, agree a beet price that enables sugar beet to compete in rotations on farm and British Sugar to compete in an increasingly competitive market place.”