The full extent of this disastrous sugar beet campaign for growers and British Sugar is still unfolding. Both face substantial losses – more than £1500 for every condemned hectare for growers and millions in lost profits for the processor.
With hindsight, this was a disaster waiting to happen. British Sugar’s decision to close factories reducing processing capacity, inevitably pushed the campaign later. Coupled with the shift away from pre-Christmas lifting and long-term clamping to just-in-time lifting and delivery, it increased the amount of beet potentially exposed to winter frosts.
This year’s early season drought meant British Sugar, perhaps understandably, decided to delay the campaign start to boost yields and sugar levels, so when early frosts came even more beet was in the ground than normal. We all know what happened next.
It is clear the campaign will change growers’ perception of sugar beet as a safe crop to grow for some time. No one will forget this year’s havoc in a hurry. And there simply isn’t enough profit in beet for growers to take all the risk, which is what most feel is the current situation. Growers want British Sugar to recognise the risk they are taking in prolonged campaigns.
The end result will be to bring the NFU and British Sugar back to the negotiating table again, much earlier than either party envisaged when announcing their new relationship about 18 months ago.
First up for discussion should be how this year’s campaign has been handled. Everyone should recognise it has been exceptionally difficult for all sides, and British Sugar staff have worked extremely hard to keep beet going into factories.
But was the communication between grower, factory and British Sugar field staff effective enough? Many growers will identify with Norfolk grower Jim Alston’s story of British Sugar’s fieldsmen agreeing a field could be lifted to find the factory shut for a three-day period.
“There has been no joined up thinking. Loads have been rejected despite seeking instruction from British Sugar.” He hopes the NFU will tackle British Sugar where growers have been left “high and dry” by factory closures for specific issues.
Rutland grower George Renner is equally unimpressed by British Sugar’s communication over whether factories would accept beet.
Once Newark factory started to run poorly, communication over slicing rates stopped, and rejections began almost regardless of quality, he says.
“There is no point lifting it when you know it won’t be accepted. But you can’t react if British Sugar is not telling you what it is doing. We feel badly let down.”
Those stories, and many more beside, make it vital British Sugar looks closely at its communication strategy and assess whether it can be improved.
Factory performance should also be assessed. Many growers feel Cantley and Newark factories were unable to cope as well as Wissington and Bury St Edmunds with deteriorating beet. Anecdotal evidence suggests the latter two were accepting beet rejected at one of the others. If true, British Sugar must look at the reasons behind the difference and invest where necessary to bring all factories to the same standard.
But the main debate will surround campaign length, and how to make sure growers are adequately covered for another 2010/11 campaign.
It seems inconceivable British Sugar will do an about-turn and build a fifth factory to create extra processing capacity, which would help shorten the campaign length. Its decisions in recent years have all been about increasing efficiency, and the longer campaign length increases the UK’s competitiveness against other European countries.
There could be more discussion about whether to store more beet in long-term clamps for delivery after Christmas. Sugar content drops faster in clamp than left in the ground, which was why the just-in-time lifting policy was introduced. But some growers will feel that lifting pre-Christmas might be a safer option now, even if it reduces income.
Earlier factory opening dates would also reduce the amount of beet in the ground late in the season. It goes against British Sugar’s ethos of maximising yield and sugar content, but rather than maximising its profits at farmers’ expense, the processor should reduce the risks faced by growers by opting for an earlier start, says James Black of the Bury Factory Beet Group.
“It is still better to take a lower yield at the front end and get the land turned around and put into something else than it is to wait until the end of March and still not be able to put the land into anything the following year.
“This year we will have lost more yield through frost – which you get as a result of late campaign – than we would ever have lost by taking a certain amount [of beet] early.”
Jay Wootton, a specialist in root crops for consultancy firm Andersons, believes those growers lifting early might need the early lifting bonus to be reinstated as an incentive to lift early.
But equally some growers might be looking for a larger late-lifting bonus to compensate more adequately for years when a proportion of crops have to be written off.
“If long campaigns stay, there needs to be far more incentive to lift later,” says Richard Cobbald, farm manager for West Wratting Park Estate near Cambridge. “If there was, I would feel far less aggrieved at taking all the risk.”
He suggests forming large grower groups may be aone way of sharing the risk between farms. Group members could then agree to redistribute the contract price between members based on when it was lifted, with early lifters receiving less to compensate growers for the extra risk in lifting late, he explains.
Another possible mechanism is some form of grower/processor levy on harvested beet, which could be used to compensate growers in the event of another 2010/11 campaign.
That is the favoured option of consultant David Bolton, who suggests a levy of, say, 35p/t from growers and 65p/t from British Sugar could be used to set up a revenue fund.
“If that was given to a sensible insurance or mutual firm to grow, then it could either use be used directly or chunks could be sold to growers a bit like an insurance premium.”
Communication in campaign
Factory opening dates
Return to clamped beet
Early & late lifting bonuses
The 2011 beet price of £23.60/t has only added to the frustration of many growers in the past month.
Since being calculated last June, growers have had to watch commodity prices for wheat and oilseeds surge towards and past record highs, while fertiliser and other input prices have also increased.
Beet now looks very much the poor relation. It has left some growers questioning the pricing mechanism and their long-term future in the crop, despite signing contracts for the coming season; a feeling only exacerbated by the harvest nightmare.
British Sugar has already reacted with its programme of exceptional measures, including agreeing to pay the full contract price on all beet delivered to factory and rebating 50% of growers’ seed costs if they deliver 100% of quota.
The move is not unexpected, Mr Alston says. “But it is cynical to put compensation into next year’s crop, and to get the seed rebate you have to grow more than 100% of quota.”
Mr Renner says the offer is just “crumbs from the table”, while offering to pay full price for all beet represents a good deal for the processing giant, which will be attempting to replace carryover stock it will lose this season. “At current world sugar prices, that price is a bargain.”
He is thinking about cutting back his area this season, but suggests for it to send a message to British Sugar a big enough group of growers would need to do the same.
Norfolk grower Thomas Love has already made that decision. He has leased 5% to a neighbour, and cut back by another 10%, with more possible.
After producing over quota in 2009/10 he can afford to cut back to grow more spring barley, safe in the knowledge that this year’s harvest doesn’t count towards quota fulfilment, and that he can grow 10% over quota the following season when the beet price looks like it could be at least £26/t.
“The mechanism of the pricing is all wrong,” he says. “Why are we taking last year’s costs to price beet delivered next January. It should be based on the costs in June of the growing season.”
Brown & Co’s Charles Whitaker agrees. “The industry should revisit the referencing period and average yields used because it is clearly wrong.
“Beet for a variety of reasons and not least its impact on following crops needs to perform better than combinable crops, and we can currently grow and sell 2011 and 2012 combinable crops forward at substantially better margins than beet.
“That’s not good for sustainability of the beet crop. No one expects beet to match wheat at £200/t, but equally to be bottom of farm gross margins on the average grower’s farm for the 2010 and 2011 crop should be alarming to British Sugar.”
For more on the sugar beet crisis, see our dedicated page here.