How changes in the sugar sector will affect beet growers

Prices are falling, sugar consumption is in decline and EU quotas are being removed in 2017 – with all the uncertainty surrounding the sugar beet crop, what sort of future does it have on farms?

As far as growers are concerned, there’s little doubt that there’s going to be a seismic shift in the UK sugar beet industry, warns independent consultant Robin Limb, formerly with British Sugar.

“We’ve all seen it coming, although there has been an element of denial,” he says. “And it will take until the end of the decade to sort itself out. Equilibrium has to be restored – not just with over production, but with processing capacity too.”

See also: Oilseed rape under threat as farmers question its future

There are 3,500 UK beet growers today, reports Mr Limb. “That number will have halved by 2020. Those that remain will be specialist producers, capable of consistently producing very high yields at a low cost per tonne of production.”

The deciding point for them is yield, he believes. “If you can achieve yields of 75t/ha and above, you should be fine, providing your attention to detail is good. It’s the 55-60t/ha growers that will need to reconsider – and that’s because they won’t ever see a sugar beet price with a three in front of it again.”

A number of factors have combined to create the current situation, which he describes as a “near-perfect storm”.

Too much sugar

“The first of these is that there’s simply too much sugar around. Europe has just enjoyed a record yielding crop, with the UK achieving its fifth successive record yield in just 10 years, and the rest of the world is the same.”

As a result, the world market price is now well below the average cost of production for many, with little sign of improvement in the short term, he notes.

“The fact that EU quotas are being removed in 2017 has added some heat. All the EU processors have signalled that they intend to expand production after that, which they can only do by taking market share from others. So they’ve gone into battle already, two years earlier than many predicted.”

That has put the big sugar customers in control, he comments. “They have a choice of manufacturers to buy from, so prices are tumbling, as each tries to establish itself as the cheapest supplier.”

In Europe, there’s currently a “last man standing” mentality from the French and Germans, says Mr Limb. “They are prepared to absorb some pain while there’s an oversupplied market. And it’s easier for them to do that because they are co-operatives, so they don’t need to make two margins or to report to shareholders.”

That’s different to the UK, where both the grower and the processor need to earn a margin, he adds.

© Tim Scrivener

© Tim Scrivener

Stock management and storage also has a bearing with sugar. “It’s a heavy, bulky product, but it’s fairly easy to ship. So sugar can come here from Europe, at a heavy discount, without any trouble.”

However, it costs £30/t to store sugar for 12 months, reveals Mr Limb. “It can’t just be tipped into a heap and left alone. It has to be ventilated and stored in the right conditions, which has a cost.”

For that reason, it’s better to sell it immediately and take a lower price, he says. “The UK has to be able to sell its sugar, regardless of what the market is doing.”

However, despite the current turbulence and fears that British Sugar may have lost some contracts, there are still reasons to be positive, stresses Mr Limb.

UK efficiency

“The UK has the most efficient sugar beet industry in Europe. In the last few years, some very committed and specialised growers have emerged, and there has been tremendous progress with yields and business performance.”

He also points out that over 200 sugar beet growers averaged over 100t/ha last year. “There’s good reason why this crop has been the envy of the arable sector. If wheat yields had kept pace with sugar beet, the UK average wheat yield would be 15t/ha.”

That’s why even if the price had been £24/t last year, rather than £31.67/t, growers still would have made more from beet than from any combinable crop, he maintains. “Margins will be tighter in the future, but the crop will still have a place.”

Charles Whitaker, managing partner with Brown and Co, points out that all markets are volatile, with most having fallen by around 40% in the last year.

“They will eventually adjust, but marginal growers are going to find it tough,” he says. “Everyone is going to have to share the pain for a while. It’s difficult everywhere, not just in the UK.”

Success with sugar beet in England is not related to land type, but comes down to grower skill, he continues. “So it’s sensible for committed, professional growers to stick with the crop. It is valuable in a rotation and flexible, but it needs to be done for a profit.”

For this reason, Mr Whitaker believes there is a need for a long-term sustainable price. “And that should be closer to £30/t than £20/t. You don’t have to go very far to find huge price disparity, so there must be a fair share of both the gain and the pain.”

For most, the 2014-15 crop has been a payback year, after a previous imbalance in favour of the processor, he notes. “Yields were exceptional and the price was good. But there were fantastic growing conditions as well, which we don’t always get.”

He highlights that AD could be a new opportunity for beet. “There are a couple of situations where growers are sending their beet to a factory, with the beet pulp then going back to an AD plant and providing a second market. So there are developments which benefit both grower and processor.”

Clearfield, or herbicide tolerant beet, could be another opportunity, he suggests. “When it’s commercially available, it would allow no-till sugar beet. And that would bring down the costs of production and simplify agronomy.”


View from the Farm

Cambridgeshire

Cambridgeshire grower David White is likely to drop sugar beet from his rotation, having grown the crop at Hawk Mill Farm for many years.

His thinking has been influenced by a change in the scale of his farming business, which will simplify field operations and allow him to carry a minimum range of machinery for cereal production, easing his life and freeing up some time.

“In future, everything will go through the combine,” he explains. “I won’t have to deal with the ever extending beet campaign length, or carry on with lifting throughout a wet winter in bad conditions, using specialist equipment.”

This latter point is important, as he is also in the process of moving to a no-till system involving the use of cover crops. “Carrying on with beet would potentially undo all the good soil structure and health work that has already taken place. Without beet, my quality of life will improve too.”

For these reasons, Mr White believes that sugar beet will suit farmers that have potatoes or are happy to continue working their soils to the maximum, rather than those that have always grown it.

“Beet should remain in the hands of really efficient growers – it’s useful in the rotation, being spring sown, and can help with blackgrass control.”

He adds that average sugar beet yields have continued to rise, when alternatives such as oilseed rape have reached a plateau. “Others, like pulses, are likely to be overdone with the three-crop rule. So beet will still have a place.”

He also points to strip tilling, which is making beet establishment cheaper and allowing the crop to be grown on land that was previously deemed unsuitable.

For those that do remain in sugar beet, tighter margins are inevitable, comments Mr White. “A free market will favour the professional grower, who makes best use of technology and new techniques to get the most from the crop.”

Norfolk

North Norfolk grower and NFU Sugar Board member Mark Fletcher will continue to grow sugar beet for the time being.

Even at the lower price of £24/t, the crop stacks up well compared to alternative break crops, such as oilseed rape and pulses, he calculates.

“We’re on light land at Walsingham, so we can continue lifting late into the season without running into difficulties,” he says. “Other crop prices have fallen too, so sugar beet isn’t an isolated case.

“And the growing costs for beet haven’t increased much, which is in sharp contrast to crops such as oilseed rape.”

Sugar beet also doesn’t attract the same pest and disease problems as oilseed rape, he points out.

A five-year average yield of 76t/ha with sugar beet puts him in a good position for the future, he acknowledges. “Dry years are a struggle, but we have seen real progression with sugar beet. Yields are going up by 2-2.5% every year.”

Having a spring drilled crop in the rotation helps to spread workloads and brings contract drilling opportunities, continues Mr Fletcher. “It fits very well. Depending on when it’s lifted, we follow it with either winter wheat or spring malting barley.”

He is prepared for a couple of leaner years, until the current glut of sugar has been used. “Every country is looking for an area reduction of 10-20% – not just the UK.”

His main fear for the future of sugar beet is that the neonicotinoid seed treatments could be lost. “If that happens, all the progress that’s been made in the last 20 years would be gone overnight.”

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