Drinkstone: Sugar beet farmer on EU sugar shake-up

The UK sugar beet industry makes an economic contribution of �800million a year, supports 13,000 jobs and is recognised as one of the most efficient industries in the European sugar sector.

After the radical restructuring following the reforms of 2006 which saw production cut, factories close and our market opened up to imports from developing countries it now faces further challenges from yet more reform by the European Commission.

Before looking at the political situation, it is worth evaluating sugar beet as a crop. Here on our own farm, sugar beet is the ideal choice for a spring break crop on our clay soils and forms a key part of our overall blackgrass control strategy.

That said, sugar beet must generate a margin to justify its inclusion in the rotation and calculating gross margins from last harvest on my own farm it is interesting to note that oilseed rape yielding 4.5 t/ha generated a similar margin to sugar beet yielding 85t/ha last year.

This is a good news story for rape more than a bad news story for beet and both crops were star performers in comparison to an ordinary year for winter wheat and a disastrous year for spring barley. However it does raise the inevitable question, is the price of sugar beet high enough to compete with other break crops?

We are currently in year two of the four year agreement between the National Farmers’ Union (NFU) and British Sugar which produced the price model to set the price of beet each year. Key ingredients of the model include the variable costs of growing the beet, currency and a wheat price link. The price of this year’s crop for the 7.5 million tonnes of contracted beet (CTE) is �27.53/tonne with all surplus beet paid at �25.00/tonne.

In addition, British Sugar offered 500,000 tonnes of Industrial Contract Entitlement (ICE) at a price of �26.50/tonne. The price for next year’s crop will be known in June, prior to contracts being issued and we wait to see what number the model generates.

Whilst some growers decided to lease out their quota for this year after experiencing losses due to frost in 2010, the full uptake of ICE tonnage indicates a willingness by growers to commit to the crop. Some of this tonnage has been taken up by existing growers expanding their area and some by new entrants. Clearly there is still quite an appetite to grow sugar beet and perhaps answers my earlier question.

Long campaigns are an inevitable feature here in the UK and are one reason why our industry is so efficient compared with many in Europe although here too campaigns are being stretched. To offset some of the risk of long campaigns, the NFU has been negotiating with Insurers to cover some of the loss should we have a repeat of another damaging frost year like 2010. It also continues to call for an early start to the campaign each year which is especially important in factory areas where large areas of beet are grown on heavy land.

Here on our farm we strive to minimise damage to our soil structure wherever possible by avoiding the late harvesting of sugar beet. We are members of the Bury Beet Group which comprises 32 growers who collectively produce 160,000 tonnes of beet delivered into the Bury St Edmunds factory. The group is made up of heavy and light land growers, with the heavy land lifted first and the light land later. Light land growers are financially incentivised, via a levy arrangement, to leave their beet in the ground and also benefit from a smooth cashflow throughout the campaign, irrespective of individual lifting dates. Frost risk is shared equally by all growers in the group and light land growers also retain the late delivery bonus paid by British Sugar. Membership of the group enables us to drill all of our heavy land after beet with Winter Wheat by the end of October with obvious advantages.

Politics

The European Commission has proposed the removal of sugar quotas after 2015, effectively opening up our markets to the rest of the world. As previously mentioned, radical reform of the sugar sector took place in 2006 which had the effect of turning the Eureopean Union (EU) from being the world’s second largest exporter of sugar to one of its biggest importers.

Since then, global developments have fundamentally changed the supply and demand dynamic as world sugar prices and costs of production have soared and imports have become less attractive and less reliable. By abolishing quotas, the Commission believes that it will encourage production within Europe, however following the downsizing undertaken in the previous reform, the UK needs a period of transition in order to adapt to a more expansionist European policy. The majority of EU countries are urging policy makers to delay the introduction of reform until 2020.

The UK industry accepts that reform is inevitable and that it must compete in a global marketplace. Ten years ago, costs of sugar production in the EU were 300% higher than cane sugar produced in Brazil. Today, due to extraordinary improvements by both growers and processors, this gap has narrowed to just 30% but there is still further to go until we become competitive.

As growers, we have to continue to push yields up and the recently launched BBRO 4 x 4 initiative, aims to raise yields by 4% each year over the next four years and is a direct response to the challenge of making the UK globally competitive. When you hear that the world record for sugar beet was set by a grower in America who recorded 177 tonnes/ha, it makes you realise that there is still some potential!

As growers, we have to keep going, keep improving but at the same time ensure that we receive a fair commercial return for our efforts. Whilst the relationship between the NFU and British Sugar has perhaps never been better and reaching agreement on whole beet sampling is a good example of this, we recognise that we will always be on opposite sides of the negotiating table and this is where I have some worrying news.

The Commission’s proposals seek to remove the ability of growers and processors to carry out commercial negotiations, in other words, the NFU would lose the right to collectively negotiate on behalf of growers with British Sugar, its monopoly purchaser. Neither British Sugar nor the NFU support this proposal and intense lobbying of MPs and MEPs is under way in order to retain the current framework of negotiation which has delivered a ground breaking contract between grower and processor ensuring stability of beet supplied to factories here in the UK.