A groundbreaking price deal for sugar beet is set to lead to increasing divergence between the best and worst growers.
Depending on currency movements over the coming weeks, growers will receive about £24.50/t for sugar beet in 2011.
The deal is the first time growers will know the price they will receive before being asked to sign production contracts.
Carl Atkin, partner at Bidwells Agribusiness, said it ensured sugar beet would remain one of the most profitable crops for the best growers.
“But it was likely to be a different story for growers with much lower yields.
“Those regularly achieving 100t/ha or close to this clearly have much lower unit production costs than those still hovering down at 60-70t/ha.
“Even with a price of £24.50, the best guys will be down at the circa £20/t mark or maybe even below.
In a year of depressed combinable prices, for many it will still be the best crop.”
British Sugar has also unveiled a voluntary outgoers scheme aimed at encouraging poor performing farmers to stop growing the crop.
Farms with low yields and those at distance from sugar beet factories will be paid up to £15/t if they give up beet contracts.
But Mr Atkin said it remained to be seen whether farmers would view the scheme as attractive.
“My concern with any outgoers scheme is that British Sugar may not succeed in eliminating the smallest or least efficient growers.”
Farmers looking to quit beet would have to consider the wider impact of growing an alternative break crop such as oilseed rape, said Mr Atkin.
“You need to think about impact on combining and storage capacity if you drop beet and go to rape – and the impact on workloads and other resources.”
Farmers may also prove reluctant to opt out of a fixed price income from beet to a market driven price income from oilseeds.