The new IPA agreement’s offer of a three-year contract, partially linked to the European sugar price, has been an opportunity for growers who can make a positive margin from production before subsidy, says Andersons director Nick Blake.
“However, at the base level, these growers are relatively few and probably not subject to high market rents.” One-year contracts may be more common, he suspects, to give more flexibility.
Sterling’s fall in value makes the 2017 beet offer look less attractive, given the currency-related wheat price improvement. That said, alternative cropping options are unlikely to be more profitable for many growers.
- Three-year contracts bring stability to most profitable growers
- British Sugar seeking new growers to increase production
- EU beet price could help restore profitability
The current EU sugar price is unlikely to attract a bonus, but the outlook according to British Sugar is more positive, says Mr Blake.
“According to recent reports, there could be £1.50-£4/t bonus on the 2017 drilled crop, but there is a long way to go until this bonus is crystallised.”
The end of quotas could see some of the remaining factories across the EU increase production to improve marginal economics.
There is perhaps less scope for UK factories, particularly if the 2017 contract offer fails to incentivise extra beet plantings, he says. “British Sugar might need to revise their contract offer to secure enough tonnage to optimise factory throughput.”
Brexit could see the EU become a net exporter again, as the UK takes a lot of Continental sugar, says Mr Blake.
“Preferential sugar imports are allowed by the EU – will the UK take some of these? And what tariff protection, if any, will be placed on the UK market?”
The position of UK growers is weak, with few alternative markets for sugar beet, he adds. “There will be much interest in ABF strategy after Brexit – will sugar refining be better for them in Europe?”
Farmers Weekly says
Richard Allison, arable editor
- The outlook for sugar beet is more positive than a year ago, with an 8.5% price rise for the 2017-18 crop – still below the £31.67/t in 2014-15, but margins compare favourably with other crops.
- Growers will also benefit from three-year contracts, offering more price certainty. This is a long way from predictions two years ago that the end of the EU sugar regime in 2017 would spell the end of the crop.
- British Sugar is looking to increase area by 25% in 2017-18, so beet growing is open to new growers for the first time in many years
The Farmers Weekly outlook articles are based on Andersons Outlook 2017. Copies of the full publication can be downloaded from the Andersons website by clicking on ‘Publications & Events’. Alternatively, request a printed copy by telephoning 01664 503 200.
Andersons is running a series of seminars in the spring looking at the prospects for UK agriculture in greater detail.
3 March – RAF Club, Piccadilly, London
7 March – Harper Adams University, Newport, Shropshire
8 March – Westmorland, J36 Auction Centre, Kendal
9 March – Carfraemill Lodge Hotel, Lauder, Berwickshire
10 March – York Racecourse, York, North Yorkshire
14 March – Yew Lodge Hotel, Kegworth Leicestershire
15 March – Perth Racecourse, Perth
17 March – Newmarket Racecourse, Newmarket, Suffolk
21 March – East of England Showground, Peterborough, Cambridgeshire
22 March – Salisbury Racecourse, Salisbury, Wiltshire
23 March – Exeter Racecourse, Exeter, Devon
24 March – Royal Agricultural University, Cirencester, Gloucestershire