New prices could force farmers to 'question the viability' of sugar beet
PUBLISHED: 16:28 18 September 2019 | UPDATED: 16:45 18 September 2019
New contract prices for East Anglia's sugar beet crop could force some growers to question its economic viability on less-productive land, said farm advisors.
British Sugar and the National Farmers' Union's sugar board (NFU Sugar) have announced their agreed contract terms for the 2020/21 campaign and beyond.
One-year contracts are on offer for 2020 at a price of £19.60 per tonne with no crown tare deduction, equivalent to a price of £20.99 per tonne on a crowned basis. There are also three-year contracts for 2020-22 offering a price of £20.45 per tonne with no crown tare deduction, equivalent to a crowned price of £21.90 per tonne in year one and £21.18 per tonne in years two and three.
But Jason Cantrill, farm consultant in the Norwich office of Strutt and Parker, said the low margins meant growers would need to get to grips with their costs of production in order to make an informed financial decision on whether to grow the crop.
"The figures do appear to throw into question the future of sugar beet on those farms where it is hard to consistently achieve high yields," he said.
"While some growers are able to grow sugar beet for around £18 per tonne, we know it is costing others closer to £25 per tonne before rent and finance costs are taken account of. On this basis, the agreed prices suggest a small margin for some and a potential loss for many.
"Top-performing growers who can consistently hit yields of 85 tonnes per hectare or more will be able to make money, but growers struggling to achieve high yields will question the viability of this crop. Yield is king."
Both contracts will offer a bonus price for growers, which triggers if the EU-reference price for white sugar reaches a certain price.
For the one-year contract, if the reference price reaches €375 per tonne, growers will receive a 15pc share of the price above that point. For the three-year contract, if the price reaches €400 per tonne, growers will receive a 25pc share of the price above that point.
NFU Sugar board chairman Michael Sly said: "Considering the difficulties and uncertainty facing growers now and into the future, it is important that a price has been agreed that recognises the risks and costs now associated with growing sugar beet.
"With these new contracts, growers will now receive a greater benefit from any uplift in sugar prices than in current deals and our agreement ensures that these bonuses will not be compromised by Brexit.
"We are committed to improving transparency in the supply chain and ensuring growers are paid fairly and the removal of the long standing 0.02% price reduction in measured sugar content demonstrates that."
British Sugar agriculture director Colm McKay said: "We're pleased to have reached this agreement with NFU Sugar and believe it offers growers both certainty and choice. Many growers were asking us for a new three-year contract, and together with NFU Sugar, we have delivered that. Both the one-year and the three-year contracts benefit from market bonus triggers, allowing growers to share the benefits when the sugar market performs well."