17 August 2001

Beet quota is nipped in the bud

By Andrew Shirley

BRITISH Sugar has nipped a proposed beet quota leasing market in the bud.

Although in some circumstances quota is already leasable as part of the Rhizomania Stewardship Scheme, other "grey" leasing arrangements have always been frowned upon by BS.

But in light of the recently announced sugar beet outgoers scheme it had been hoped by some quota brokers that BS would be more flexible in its interpretation of contract management rules.

It was felt that an alternative to buying or selling quota would establish a bottom in a trading market struggling to find its level. "If quota could be leased at £6-£8/t then £50/t would seem a realistic selling price," said Duncan Clark of Boston broker DCFM.

But, in a joint statement issued with the NFU on Tuesday, the sugar firm said: "In the past there have been significant issues with growers "sub-letting" the actual growing of beet to other farmers while taking no part in the actual production and delivery. This was not and is not acceptable."

The price of quota has stabilised over the week with most traders reporting prices below £45/t. Last week DCFM was selling at up to £55/t, now Mr Clark says most deals are being struck at close to £40/t.

"I expect the market to rest between £35-£45/t," adds the agent, who so far has drawn up contracts for over 40,000t of beet. "Some buyers who were planning to sell at £50/t are now considering buying if the price falls much further."

"Just £10 could make the difference between buying and selling," confirms Bidwells Rob Cumine, who has developed a model to determine the value of sugar beet for specific farm enterprises over a period of time.

"This will enable farmers to assess the true cost of a sugar beet contract to their business before making the decision to buy or sell." The service is free to all farmers.

Confusion still surrounds the tax implications of quota trading. It had been expected that any transactions would be treated under Capital Gains Tax, but it has now emerged that the Inland Revenue may pursue a different approach.

"The latest signs are that quota could fall under Income Tax," warns Jeremy Moody of the Central Association of Agricultural Valuers. "Contracts may also not qualify for roll over relief," he adds.

According to Grant Thorntons Nick Kemp a decision from the IR is expected within the week. "The revenue understands the need for a quick judgement and we hope to have confirmation soon."

&#8226 CAAV-endorsed information service Beet-Talk is organising a series of seminars for growers to examine the issues arising from the outgoers scheme. Further details are available on 01594-836128. &#42