British Sugar’s beet pricing for 2008 is insulting, says analyst

British Sugar‘s pricing structure for the 2008 sugar beet crop was “insulting” and growers should consider not growing the crop, particularly if they average 62.5t/ha (25t/acre) or less, the Norfolk Farming Conference heard.







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Delegates were also told a further 6-10% cut in quota might be needed to hit the European Commission‘s 6m tonne reduction in sugar production (see More sugar beet quota cuts could be on cards).


Net farm margins presented by Charles Whittaker, agricultural business manager for Brown & Co, suggested sugar beet would be the poorest performing crop in many rotations in 2008. “It is pretty obvious that the beet pricing structure for 2008 doesn’t compete. In fact it is inappropriate why are we talking about £21/t for next year, when we already have £24/t in place for 2009? It’s insulting.”


Growers who consistently averaged less than 62.5t/ha (25t/acre) should be letting someone else grow the crop, or stopping altogether, even at £24/t, he said. “Yes, commodity prices [for other crops] are hugely variable, but beet is consistently poor.


“I vote ‘no’ to growing the crop at £21/t.” He told Farmers Weekly he knew of some individual growers that British Sugar had accepted seed back from because their plans had altered. “There is an opportunity for growers to do that. British Sugar might respond.”


But William Martin, vice-chairman of the NFU‘s sugar board, didn’t believe there would be any increase in prices for 2008, although he recognised almost all growers were not satisfied.


Sugar beet


A bleak future was painted for sugar beet at the Norfolk Farming Conference


But he expected growers to fulfil contracts to supply for 2008, because, as Paul Matthews, a solicitor for Birketts LLP, confirmed to the conference, the contracts were almost certainly binding.


British Sugar had to make a commercial judgement about prices, Mr Martin noted. “It has to pay a higher beet price to make sure its factories are filled. Has it done enough to fill its factories for 2009? The honest answer is: I don’t know they don’t know.”


“What is essential is that if growers believe prices are not enough [for 2009] that they tell British Sugar.”


But he didn’t foresee a mass exodus from the industry in 2009. “I’ve spoken to several growers, and while they say £24/t is not exciting, they do believe they can make a go of it.”


He felt the price was good enough to keep him in beet and he pointed to British Sugar’s world position as a reason to feel confident for the future. British Sugar’s claim to be Europe’s most efficient and innovative sugar company was “probably true”, he added. “It is why they feel confident enough to offer the most attractive price in 2009 for Europe, and one they got a bit stick over from their fellow processors.”


Out of rotation


Farm profitability could be substantially increased by removing sugar beet from the rotation in 2009, Anglia Farmers’ Kit Papworth told the conference, based on his model farm projections.


Switching out of sugar beet in 2009 would see a 21% increase in management profit compared with a 26% decrease in profit compared with 2008 if the crop remained in the rotation, he calculated for the 400ha farm growing 70ha of beet at an average yield of 65t/ha.

















































Whole farm budget – Model farm figures


 


2007


2008


% increase


Whole-farm gross output


335,140


486,340


45


Total variable costs


117,240


131,202


12


Whole-farm gross margin


217,900


355,138


63


Total fixed costs


321,200


341,726


6


Profit before rent and finance


-103,300


13,402


 


SFP


92,800


92,800


 


Management profit


-10,500


106,201


 


Source: Anglia Farmers

























































Whole farm budget – Model farm figures


 


2009 (incl beet)


% increase


2009 (no beet)


% increase


Whole-farm gross output


510,920


5


489,830


1


Total variable costs


157,443


20


106,673


-19


Whole-farm gross margin


353,477


0


383,157


8


Total fixed costs


368,176


8


346,870


2


Profit before rent and finance


-14,699


 


36,287


 


SFP


92,800


 


92,800


 


Management profit


78,101


-26


12,9087


21


Source: Anglia Farmers