Beet growers face another price cut – but at least they have a price

Sugar beet growers are set to suffer another price cut – despite a ground-breaking deal which aims to guarantee the crop stays profitable. And British Sugar will offer an outgoers scheme for those with low yields or a long distance from any beet factory.

BS will offer farmers about £24.50/t for growing beet in 2011. The exact price, which will depend on currency movements over the coming weeks, will be published next month. It represents a 5.8% drop on the £26/t paid for 2010.

For the first time, however, growers will know the price they will receive before being asked to sign contracts. Many growers will still find the crop profitable. Some who don’t will have the opportunity to surrender contracts in return for compensation.

Like this year, an extra £1/t will be added to the 2011 transport allowance. Full details of the agreement – which follows lengthy talks between British Sugar and the NFU – will be sent to growers today (Friday, 28 May).

The 2011 price was calculated using advice from independent teams of farm business consultants from Andersons and Brown & Co. It includes four elements to cover production costs, currency movements and a wheat-related bonus.

NFU sugar chairman William Martin said the deal gave growers greater transparency and took many of the risks out of beet growing. “It delivers certainty via a fixed guaranteed price at the point of contracting,” he said.

Growers voiced disappointment as news of the agreement emerged at open days organised by the British Beet Research Organisation this week. But British Sugar said it would offer up to £15/t in compensation to growers wanting to quit the crop.

The company has set aside £7m to invest in an outgoers scheme targeted at low-yielding growers and those farmers who are a long way from factories, said Colm McKay, the company’s head of agriculture.

“The scheme offers growers an alternative if they are struggling to make a margin,” said Mr McKay. It would run concurrently with contracting and there would be no guarantee of extra tonnage being available for 2011.

Beet prices for 2012-14 will also be calculated using the same mechanism. But British Sugar said the outgoers scheme was a one-off for 2011 only. It aimed to reallocate contract from inefficient growers to high-yielding farms closer to factories.

Agribusiness consultant David Bolton, partner at David Bolton Partners, said some grower would question the assumptions behind the pricing mechanism. “This is the first time many growers have be told whether they are good or bad,” he added.

The four-year deal would take the industry to the next round of EU sugar regime reform in 2015, added Mr Bolton. “It must be more right to drive the industry to being more sorted than we have been,” he said

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