Sugar beet growers will receive compensation worth up to £15/t if they sell their contracts and quit the crop for good. British Sugar will run an outgoers scheme for low-yielding growers and those who are a long way from factories.
British Sugar‘s £7m voluntary outgoers scheme aims to re-allocate contract to better-performing farmers who achieve higher yields.
All growers with a five-year average beet yield below 45t/ha will be eligible for compensation if they surrender their contracts. But those below 60t/ha may also qualify, depending on distance:
Qualifying sellers must find a qualifying buyer who will purchase their surrendered contract – defined as a grower achieving over 65t/ha or close to the factory. Buyers must have been notified by British Sugar that they qualify to buy contract.
New growers within 30 miles of a sugar beet factory will also qualify as buyers. As an extra incentive, British Sugar will allocate an extra 0.5t of quota for every one tonne of contract purchased by a qualifying buyer.
This means a buyer purchasing 1000t of quota through the scheme will receive a contract worth 1500t. British Sugar believes the ploy will encourage buyers to bid up to 150% of the market price for quota – flushing out low-yielding growers in the process.
The scheme means there is no guarantee that temporary contract tonnes will be available for 2011. The scheme will be the only means by which growers will be able to secure permanent contracted tonnage.
In a further move, Newark growers will be allowed to sell to any grower but will only be permitted to buy contract from another Newark grower. British Sugar hopes this will ease the oversupply of beet into the Newark factory.
An outgoers information pack informing growers whether they qualify as an approved buyer or approved seller will be sent to farmers during mid-June. Non-qualifiers will be entitled to trade contract on the open market as usual.
Staying in beet?
Farmers will be paid about £24.50/t for beet next year under a ground-breaking deal which means for the first time growers will know the crop price before they sign contracts.
British Sugar will write to every grower next month outlining their contract entitlement and the firm price that the company will pay for beet. Growers will then have until 13 August to sign and return the contract.
The price will be calculated using a pricing mechanism made up of four items. They include beet production costs based on yields of 67.78t/ha, fixed costs and overheads of £357t/ha, currency fluctuations and a bonus based on wheat prices.
“With current exchange rates fluctuating between £0.84/€ to £0.88/€, we anticipate a contract price of between £24 and 25/tonne,” said Colm McKay, British Sugar’s head of agriculture.
Currency is the main sensitivity as the beet price moves by 25p/t for each 0.01p movement in the exchange rate. “The extent of currency exchange rate uncertainty could mean the price falls outside this range,” said Mr McKay.
Agreed by the NFU and British Sugar, the pricing mechanism was devised by independent agricultural consultants – Brown & Co and Andersons. A £1/t extra freight payment will continue for 2011/12.
NFU sugar chairman William Martin said: “This will give growers greater certainty and result in a less adversarial relationship with British Sugar. It will also help improve the competitiveness of the industry ahead of sugar regime reform in 2015.”