Lower contract price leaves East Anglia's sugar beet growers contemplating their options
With a lower contract price on offer for 2019, East Anglia's sugar beet growers are contemplating their options, writes ROBIN LIMB, an independent agricultural consultant based in Hunstanton.
The 2019 sugar beet contract has now landed on growers’ doormats or via e-mail in-boxes, and some may still be contemplating their options.
As they look out of the office window at this year’s very average crop, and watch prices for alternative crops firming, they may be forgiven for wavering slightly. Will the 2019 beet price be sufficient to maintain growers’ commitment to the crop?
British Sugar had no option but to negotiate a lower price for 2019, given the depressed market conditions. Faced with little, if any, manufacturing margin it cannot afford to pay a penny more than is absolutely necessary.
In return, the National Farmers’ Union (NFU) was reluctant to concede to a price reduction, given the buoyant market conditions for competing crops. Little wonder the new beet contract was delayed for so long.
Growers should examine the fine print of the new contract carefully to ensure they are fully aware of some of the guarantees it offers, including a future commitment to greater risk/reward incentives linked to the fortunes of the sugar market. Although the guaranteed price for 2019 is lower, at £19.07/t, in reality, when the crown is paid for, this will equate to £20.42/t.
The sugar market beet price bonus will now be triggered earlier at €375/t, and growers will share in a greater percentage (15pc) if prices rise. If the 10-year low world sugar price starts to recover next year, it only needs to push the EU price up by €15/t before a bonus will kick in for growers.
All crop yields have disappointed in 2018, due mainly to a cold, wet spring and a dry summer. Sugar beet is still playing catch up, but given a favourable autumn and winter, it may yet recover some lost ground – only time will tell. The question today is: “Are there credible alternatives to beet?”
Oilseed rape crops have already been sown, and some farmers may have decided to uncomplicate their rotation by reverting to an all-combinable crop rotation, substituting beet area for rape instead: the economics of both look pretty similar for the coming year. But, some oilseed rape crops have already been ripped up due to cabbage-stem flea beetle attack, in the absence of neonicotinoid seed treatments.
Sugar beet remains the break-crop of choice in many arable rotations in eastern England, and is also popular as a fodder crop in the west. Despite its dwindling profitability, beet still contributes to the farming smorgasbord of options. Spring-sown crops afford the ability for blackgrass control, and break the cycle of disease carry-over that is an inevitable by-product of continuous winter cereals.
Many farmers who unceremoniously dumped beet in the 1970s later came to regret it, as both yields and prices subsequently soared. Sugar beet yields have grown by over 60pc since that time, leaving all other broad-acre crops in its wake: this potential shows no sign of abating in the immediate future.
So what should growers do? Sugar beet has delivered huge profitability over many years – for both the farmer and processor, but changing market dynamics in a post-Brexit world may put a different complexion on its prospects.
On paper, the British sugar beet industry is among the most efficient and lowest-cost in the world, and this should stand it in good stead under any scenario once we leave the EU – and the Sugar Regime. We may have to face greater import pressure from subsidised countries such as Brazil, but should growers be worried about that as long as there is a guaranteed beet price on offer?
The removal of neonicotinoid seed treatments represents yet another challenge to be faced, with few, if any, alternatives to control the aphid vectors of virus yellows disease, plus many other pests to boot. Worse still is the fact that the insecticide sprays that once controlled aphids are no longer available or effective, due to chemical resistance in the aphid population.
Despite the many so-called “hassle factors” associated with growing sugar beet, the crop still has much to contribute to the arable rotation in the regions where it is grown. Market forces will now increasingly dictate the future profitability of sugar producers, but for growers the key factors will be attainable yield and the guaranteed price British Sugar will offer, plus the bonuses that come to fruition going forward.
SUGAR BEET AREA SCALED DOWN
Some East Anglian farmers have decided to reduce their sugar beet area for next year as a result of the lower 2019 price.
British Sugar said the contract price of £19.07/t with no crown tare deduction was equivalent to £20.42/t under the terms of previous contracts, and the deal negotiated with NFU Sugar would “stand us in good stead for the future”.
But John Collen, who farms about 2,500 acres of land near Lowestoft, said with this year’s crop dropping significantly against last year’s record yield, there was a “psychological barrier” to seeing the price fall below £20/t.
“We fully understand that the £19 is a different formula to the £20 we are getting this year, but there is a psychological barrier to this when we are seeing yields 30-40pc lower than last year,” he said.
“They are down to a level we have not seen for three or four years. We have returned to something more like a 10-year average, and that is driving home the economic reality of that £19 figure.
“We have reduced our crop by 25 acres for next year [about 10pc] and that is purely on the economics.
“What I am not suggesting is that we should stop growing sugar beet. It would be stupid to suggest it. But it does make you look at these marginal areas.”