The sugar beet sector is surrounded by uncertainty after swingeing beet price cuts and ongoing political uncertainty. Crops asked British Sugar’s managing director, Gino De Jaegher, for his views on where we go from here.
Crops: Figures show sugar beet will produce a significantly lower margin than other crops, particularly oilseed rape and cereals, which are expected to remain firm. Why should beet growers continue with the crop?
Gino de Jaegher: Sugar beet historically has been a stable, guaranteed “banker” crop giving excellent rotational benefits to many farms.
I am told a number of growers gave up beet growing in the 1970s in similar circumstances and have regretted it ever since. We believe our recent agreement with the NFU to enhance beet prices, in response to increased cereals and oilseed prices, will maintain sugar beet’s popularity.
Why are you only paying £20/t for next year’s crop, when you are offering £24/t for 2009?
For the 2008 campaign, £20/t is the minimum guaranteed and will be paid on all beet delivered. That said, at the current euro exchange rate and cereal prices the 2008 beet price, paid on all beet delivered, would in fact be over £23/t.
What sort of beet industry do you expect to see in 10 years’ time?
My vision is of the UK as the leading sugar industry in Europe. We have a track record of being innovative and we need to continue this to stay ahead of the game.
We will need strong, professional relationships with our customers and our growers. Basically, I see a successful, profitable industry for both processor and growers.
So how many growers will remain and what sort of acreages will be grown?
It is difficult to make these predictions on this timescale, but we believe we will be growing and processing sufficient sugar to meet our national quota and supply both our industrial customers and our retail needs through the Silverspoon brand.
We have a desire to increase our market share and want to work closely with our growers in achieving this.
Do you see, or indeed want, these needs to be met by fewer, larger, more efficient growers?
As in all industries, economies of scale tend to encourage a trend towards fewer, larger organisations. However, we know there are many smaller growers with good yields and returns, so I am sure they will continue to grow.
Why is there a £150/t cap on the wheat escalator? Surely that could prevent the sugar beet price rising to a level where it might become more competitive with other crops?
Estimates on future cereal pricing do not predict prices above this level in the longer term.
But what if those estimates are wrong?
As you would expect, we will continue to monitor the pricing of competitive crops in association with the NFU to ensure that beet remains competitive.
How much of the greatly increased prices for beet pulp has gone back to growers?
The beet payment incorporates a cereal-linked animal feed payment. It is actually averaged over two years, so it will pass much of the rising price on, spread over this year and next year.
How does British Sugar plan to tackle the rapidly widening gap between the transport allowance and cost of getting beet to the factory?
We have committed to work with the NFU to explore ways of generating greater efficiencies which could be extracted from the harvest and haulage supply chain.
And what might these greater efficiencies entail? Is there a chance that the transport allowance might have to be increased?
It is too early to speculate at this stage, but we remain confident that there are still opportunities for the industry to extract further efficiencies from the crop.
What kind of research do you think is essential for the future of sugar beet in the UK, and what kind of commitments are you making to addressing those needs?
It is essential that we continue to focus on research and development of our crop. I am particularly interested in helping get the latest technology and best practice growing adopted by our growers. To this end, I am fully supporting our ongoing commitment to the British Beet Research Organisation.
Does the uptake of this research take on a new urgency, given that growers will have to increase yields to ensure decent returns?
It is always in growers’ interests to introduce improved practices which improve yields and, therefore, profitability. Clearly, it would be beneficial for a grower to take immediate advantage of any such opportunity.
Does British Sugar have any plans to take any further part in EU restructuring? If so, when? And what will it mean for UK growers if it does or doesn’t?
The EU Commission has clearly stated its intention to remove a further 1.2m tonnes of sugar production by 2010. If this is not achieved through the second stage of restructuring, it will impose cross-industry cuts in 2009/10 to achieve its goals. We do not foresee participating in the second phase of restructuring in the UK and growers should not change their drilling plans for this season.
Does British Sugar plan to take the further 3.5% off beet growers’ contract tonnages in 2009?
We have no plans to reduce 2009 contract tonneages by this 3.5%.
DEFRA has just announced it wants to renegotiate the share-out of compensation between growers and contractors. What does BS think about this?
We were surprised to hear from the NFU that this one element of the application is apparently unresolved, as the overall application was approved on 6 February. We believe it is in everyone’s interest that this is resolved as soon as possible.
Is bioethanol from beet anything more than a temporary exercise?
While the Wissington, beet-based bioethanol project was always considered to be a unique chance based on a number of factors, it is far from being a temporary exercise.
Wissington remains the only bioethanol production facility in the UK and is manufacturing at its design rate of 70m litres a year. We will continually look for ways of optimising the output from this facility. We are also involved in Vivergo Fuels, a joint venture in Hull with BP and DuPont, to produce bioethanol from UK-grown wheat.
Many farmers have long thought that BS intended to concentrate beet production in the east, on large efficient units, close to factories. How much further does BS have to go to achieve this aim, including further factory closures?
We have no plans to close any further factories.
British Sugar has a lot of interests in China, Poland and South Africa. How will this develop and how will it benefit UK growers?
These investments show how committed British Sugar and ABF are to sugar production. Plans are in place for the continued development of our overseas sugar operations.
The wider British Sugar Group is now a major global player in terms of sugar supply – second largest in the world. This means we have greater resources, skills, knowledge and technology from which the UK can benefit.
This scale of operation and the ability to remain competitive in a challenging market is good news for all stakeholders in the industry, including UK growers.
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