Farm leaders and British Sugar have agreed a new pricing mechanism for sugar beet.
The deal follows intensive negotiations between the NFU and British Sugar governing arrangements for permanent quota.
The four-year framework, starting with crops sown in 2011, was announced on Saturday (13 February).
From this summer, prices for quota sugar beet will be determined annually based on a mechanism developed by independent agricultural consultants.
This will allow a guaranteed price to be issued before contracting starts on or before 30 June 2010.
Prices in subsequent years will be determined by the same mechanism.
NFU sugar board chairman William Martin said the agreement would lead to greater certainty within the sector.
It would mean less adversarial relationships between growers and processor and a framework to improve the competitiveness of the sector.
“We believe it is the most progressive sugar beet agreement to be found anywhere in Europe, and is at the leading edge for any agricultural product.”
In effect, the mechanism transfers the exposure to volatility of the variable cost of growing beet from growers to British Sugar.
Four components will be used to calculate the beet price:
• Production costs
• Overheads and margins
• Currency fluctuations
• A wheat-related bonus
This means, for example, that a fertiliser price increase of £3/t of beet between seasons would be reflected in full in the beet price paid.
Karl Carter, British Sugar technology director, said the agreement represented a firm platform ahead of the next round of sugar regime reforms due in 2015.
Only beet required for quota sugar is covered by the price mechanism.
But the deal also covers beet contracting, whole beet sampling, transport arrangements, an out-goers scheme and funding for research.
Sugar Beet Contracting:
• The contracting process will be accelerated. This will benefit the whole industry by requiring British Sugar to issue a form of offer and the agreed beet price to every grower entitled to Contracted Tonnage on or before 30 June. Individual growers will then have until 31 July to complete and return their Growers Offer direct to British Sugar. British Sugar will then confirm the agreed tonnage and fixed price for Contracted Tonnage. This contract will immediately become binding for both parties for both tonnage and price.
• Where British Sugar seeks additional contracts (e.g. for temporary tonnage for bio-ethanol) there will be appropriate transparency on how such tonnage is allocated to individual growers and it will remain free to establish a separate price to the Contract Tonnage price.
Whole beet sampling:
• The parties have agreed to work together to devise a simplified approach to do away with the present crown tare sampling. A sampling programme during the 2010/11 campaign will help develop a fixed crown tare adjustment, thus removing the need for future manual crowning in the tarehouse.
• There is no change to crowning arrangements for the 2010/11 campaign.
• Any yield increases that might result from this new approach will completely be to the benefit of the grower and command the full beet price for that season. This provides growers with an incentive to invest in new harvesting technology.
Late Delivery Allowances:
• British Sugar will now pay Late Delivery Allowances (LDA) at the current rates of payment on all sugar beet, including bio-ethanol and other non-quota beet. This will potentially double the total payment in future years as previously LDA was only paid in full on the beet for Quota.
• The LDA payment on non-quota beet will no longer be deducted from the gross beet price. Instead, the beet price will be fixed with LDA paid on top at the agreed rate.
• British Sugar has agreed to operate a pilot scheme based on independent recommendations from the EEDA/EMDA transport study, which was jointly commissioned by the NFU and British Sugar. A joint NFU/BS Transport Working Group will examine the impact of British Sugar assuming responsibility for the cost, co-ordination and delivery of the crop to factory.
• Growers that take part in this voluntary pilot scheme will be paid an ex-farm price. It is planned to run this pilot scheme during the 2010/11 campaign.
• British Sugar has agreed that the £1 additional transport allowance will still be available in 2011-12. • Provided the trial is successful and worthwhile savings are generated it is planned that the additional transport allowance will be phased out over four years as we move to a system where British Sugar will either arrange for cleaning, loading and delivery or pay the equivalent amount to growers.
• British Sugar has agreed that it is prepared to invest up to £7 million in an Out-goers Scheme designed to give growers the opportunity to surrender their contract entitlements.
• Details of the scheme, which would be voluntary, have still to be finalised but it is likely to be offered to individual growers identified by reference to a combination of their yield performance and distance to the factory.
British Beet Research Organisation (BBRO):
• British Sugar and the NFU have committed to support the ongoing research and development of the crop via the BBRO. Both parties will each pay contributions to BBRO on Contracted Tonnage.