Sugar beet contracts give growers a chance to balance risk and reward
- Credit: Matthew Usher
The pricing deal struck by British Sugar and the National Farmers' Union last week has given beet growers some important decisions to make about their contracts, says ANDREW FUNDELL, partner and agri-business consultant at the Norwich office of Brown and Co.
The recent beet price announcement has given growers a choice, something which, during the growers' meetings, was asked for.
The options are a one year contract with a guaranteed minimum beet price of £22 per tonne, plus market bonus (10pc share of the sugar market revenue above €475 per tonne).
Or, a three year contract offers the same beet price of £22 per tonne, plus a larger market bonus (25pc share of the sugar market revenue above €475 per tonne) for each of the 2017/18, 2018/19 and 2019/20 crops.
The choices align beet price in the UK with the European sugar price and offer an option of longer term contracts. Growers now must decide whether they opt for a longer-term fixed minimum price with a larger share of uplift or a one year price with a smaller share.
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These decisions are being made daily in arable farming businesses across the country with regard to most other crops:
Should we fix now to aid investment decisions?
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Is there a possibility of the market price rising in future years?
What is our view on risk?
Ultimately the decision of which crop to grow comes down to a number of factors, and to take a very simplistic view:
Which crop can we achieve the greatest margin?
Which crop are we invested in? (ie, does the business operate a beet harvester and drill?)
Which crop fits into and adds to our rotation?
British Sugar is competing for land area and wants to secure more than 100,000 hectares of beet annually. If the relative price of other crops increases, the attractiveness of those crops when answering the first of those questions also increases. So our decision on-farm must reflect our views on the global commodity prices – the prices will inevitably fluctuate and so provide opportunity for some.
So, a choice: Those wishing to balance risk and investment decisions now have that option, those with a bullish view of the global commodity markets may opt for the annual price negotiation. With a maximum of 30pc of the national contract tonnage available on a three-year contract, growers wanting to take advantage of this offer need to act promptly when the contracts are available from early next week.
What is evident is that we have an industry that is listening to growers, which reflects their views and is pushing forward in order to be best placed for life without quotas and a more challenging market place.
How are market prices affecting your cropping decisions? Contact firstname.lastname@example.org.