The news that Dutch growers will receive almost twice as much money for their sugar beet this year as their British counterparts has added to the rumblings of discontent already felt about the current UK pricing system.
In The Netherlands, a total of €68.80/t (£59.86/t) will be paid to those who supply quota sugar, representing an all-time high and making it a one-off and exceptional year for the Dutch.
As Egbert Jonkheer, a Dutch grower explains, it is the highest price ever paid, but he adds that it includes a profit-share element that growers are entitled to through their membership of Cosun, the co-operative they all belong to.
“This record price, which we are all delighted with, is only for sugar beet produced within quota,” he stresses. “Any surplus beet that we produce is sold for much less – €31.39/t.”
The bonus, or profit share component, represents €32.75 of the €68.80/t, he continues. “And it mainly comes from the profitable business activities of Cosun, which has done particularly well from potatoes this year. Of course, that may not be the same next year.”
Each grower’s transport costs – which have been kept confidential – are also covered by the price they receive, confirms Mr Jonkheer.
Dutch-produced sugar beet is all purchased and processed by Suiker Unie, one of Cosun’s subsidiary companies. With two beet factories processing around 22,000t of beet each day – one in the south west and the other in the north of the country – the company is performing well and meeting all of its targets.
“Grower confidence needs restoring. And the reality is that we need to see a minimum price of £30/t for this to happen”
Charles Whitaker, Brown & Co
But it’s Cosun’s Aviko potato division, which has been the star performer over the past 12 months, that is largely responsible for the current bonanza.
Not surprisingly, there have been mutterings from UK growers, which have endured yet another difficult and lengthy campaign – made worse by the very wet conditions – and which will now have to look on as British Sugar and the NFU begin the process of negotiating the next pay deal.
More profitable break crops are being considered by many, points out consultant Charles Whitaker of Brown & Co, who adds that they need a higher beet price to invest in the infrastructure needed for continued production of the crop.
“Grower confidence needs restoring,” he says. “And the reality is that we need to see a minimum price of £30/t for this to happen.”
The sharp rise in crop margins has made beet less attractive, he points out. “It also means that the pricing model that was agreed a few years ago is no longer relevant.”
Back in 2010, when a new deal was agreed between British Sugar and the NFU and the Beet Price Model was unveiled, it was hailed as a step forward and seen to offer both stability and transparency.
In effect, the mechanism transferred the exposure to volatility of the variable costs of beet growing from farmers to British Sugar. Four components are used to calculate the price – production costs, overheads and margins, currency fluctuations and a wheat price-related bonus.
In 2011, it resulted in a beet price of £23.60/t. That went up to £27.53/t in 2012 and it currently stands at £26.51/t for 2013. After this, the model is due to be updated for 2014.
A quick calculation reveals that Dutch growers would get £31.36/t if they weren’t entitled to the bonus or profit share payment, which suggests that the UK is lagging behind.
However, Dutch growers are quick to point out that land prices are much higher than those in the UK and that they have to invest in quota to be able to supply sugar beet.
Gert Sikken, director of agricultural affairs at Suiker Unie, explains that there are almost 9,000 sugar beet growers in The Netherlands, growing 73,000ha of the crop. “So the average holding size is much smaller than it is in the UK. And the average area of sugar beet per holding is 8.5ha.”
Just as in the UK, there has been rapid progress with yields since the middle of the 1980s, with 2012 figures showing an average root yield of 78.9t/ha with a sugar content of 17.1%. The over year average figures are slightly lower at 75t/ha at 17% sugar.
“We processed a total of 5.75 million tonnes of beet last year,” he continues. “We have two factories, with the same 22,000 t/day capacity.”
Harvesting begins in mid-September and continues until December, notes Mr Sikken. “Seed is ordered from Suiker Unie, in conjunction with a national recommended list. Growers have a free choice in which varieties they grow.”
How the quota system works in the Netherlands
Cosun (of which Suiker Unie is just one business unit) is a co-operative of Dutch sugar beet growers. Established 110 years ago by a group of farmers, it effectively means the processing facilities are owned by those who grow the crops.
All growers are shareholders of the business and ownership of shares entitles growers to a member’s bonus. This is paid on top of the EU beet price, providing growers have delivered an agreed minimum quantity of beet per share. There is also a maximum quantity that each one can deliver.
In this way, long-term contracts exist in the form of shares. In addition, farmers have delivery rights for quota beet – they receive the quota beet price for the corresponding beet volume. Delivery rights are freely transferable between farmers, so growers can agree a market price between buyer and seller. Reports suggest that this is currently around €0.73/kg of sugar.
HARJO HOITING, Holland
Better yields and sustainability rating advice
Harjo Hoiting is typical of the younger generation of Dutch sugar beet growers. He farms 53ha of arable land in Eexterveen, having taken over the business from his mother three years ago.
Sugar beet has been grown on the farm since the end of the 1970s and features in the rotation once every four years. “It’s been a consistent performer in terms of farm income for all of that time,” he notes.
As well as the beet crop, Mr Hoiting grows starch potatoes, barley and oats, with a small area devoted to summer flower production. Solar panels fitted to the rooves of the farm buildings in 2010 now produce enough electricity for eight-10 houses in the area.
With 75% of the farm growing root crops, soil management is a key element of the business, he explains. “Soil is at the foundation of our system and we have to take good care of it. We use as much organic matter as possible and always leave the stubble on the land and then plough it in before planting.”
Mr Hoiting is a member of the Unitip programme, an advisory service run by Suiker Unie, which aims to help growers achieve better yields and improve their sustainability rating. It provides guidance from the National Institute for Rational Sugar Production, both in terms of productivity and environmental care.
“Sharing knowledge and seeing how other growers overcome challenges is very helpful. We’ve seen yields rise quite dramatically since we joined, but just as importantly, our environmental impact/kg of sugar produced has come down.”
Variety choice has also come under the spotlight, he acknowledges. “We’ve switched to a variety, which covers the ground very quickly. It’s helped to reduce weed numbers between the plants and allowed us to reduce our reliance on herbicides.”
Sugar beet will remain on the farm for the foreseeable future, he believes. “The current agricultural policy is unlikely to continue, but we should be able remain in the crop by making higher demands on our production methods.”
UK Sugar Beet Gross Margins
Yield (t/ha) 73
Price (£/t) 29
Output (£/ha) 2254
Seed (£/ha) 171
Fertiliser (£/ha) 247
Sprays (£/ha) 195
Transport (£/ha) 372
Total variable costs (£/ha) 985
Gross margin (£/ha) 1269
Source: John Nix Farm Management Pocket Book
Note: These figures do not include harvesting costs
Sugar beet industry – UK v The Netherlands
Number of growers
Total area grown
Amount of beet processed
Number of factories
Average sugar content*
Average variable costs
2013 sugar beet price
Growers disappointed with sugar beet price