Sugar beet pricing must share ‘pain and gain’
- Credit: Eastern Daily Press © 2014
A shared 'pain and gain' pricing model is needed to create a sustainable future for one of East Anglia's staple crops, writes CHARLES WHITAKER, a managing partner at the Norwich office of Brown and Co
I write as we face the prospect of signing up to £20.30/t for beet for the 2016 cropping campaign, some £11/t below the price received for the record 2014 crop.
While I appreciate that British Sugar and indeed growers are between a rock and a hard place in the face of historically low world sugar prices, high UK sugar stocks, competitive threats from our EU neighbours and reducing protection for the EU sugar regime, I am sure we need a new pricing model which seeks to share 'pain and gain' for the long-term benefit of the industry.
The risk of price attrition and the annual struggle for growers and British Sugar to agree a price, which is just enough to grow the crop and keep the industry scale as is, is that many growers will finally lose faith in a crop returning such meagre profits. We could wake up in 2016 and find that perhaps 25pc of grower capacity has gone and in turn, in the medium term, processing capacity too.
On the back of seven-year lows on combinable crops and potatoes, it's not surprising that the price is where it is. In addition, British Sugar has serious pain to contend with from stocks of sugar from a relatively high-priced and massive-yielding 2014 crop. And we have the end of EU quotas looming too.
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I am sure that committed, sustainable yielding growers will want to keep the industry – as indeed I do – as a vital mainstay of East Anglian medium to lighter land use. AD for pulp and various other value additions will help, but the time has come to have an open debate between the NFU sugar board and British Sugar about a shared pain and gain model, where the price can float as low as it needs to, for our UK crop to remain competitive in the EU context, while having a transparent margin share arrangement with our processor.
That way when sugar prices and the market place changes, we have an auto-function to deliver a share of additional value back to the growers from British Sugar, through working alongside them to reduce costs and maximise a common margin from the crop.
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The danger of not doing so, as other commodity prices recover (as they will within the new world of global volatility driven largely by climate event impact on production against the backdrop a steady incremental rise in global commodity demand) is that we will see sugar beet drift off the bottom of the net margin page and risk loss of industry capacity as a result.