New sugar beet contract: a good deal for growers?

Sugar beet growers will be able to fix the price for some of their crop in 2021 – and receive compensation if it is affected by virus yellows disease.

Described as a ground-breaking offer, sugar beet contracts and prices for 2021 were unveiled by British Sugar and NFU Sugar on Monday (24 August).

Although the base contract prices are equivalent to those for crops in the ground now, the overall offer for next year includes some innovative additional features. Contracts for 2021 onwards will use a new sugar scale – which will see growers paid in direct proportion to the sugar content in their beet.

See also: Beet growers face double whammy on imports and neonics

Combined with the removal of crown tare adjustments, this means growers will be paid for some 3.4% more adjusted tonnes of beet for the same crop.

Growers choosing to grow beet on a one-year contract in 2021 will receive a base price of £20.30 per adjusted tonne for the crop – with a market-related bonus.

The bonus will be triggered when the adjusted EU sugar reference price exceeds €375/t (£337/t) and will pay growers 10% of the value above this level.

Growers on a three-year contract for 2021-23 will be paid £21.18/t, with a market bonus triggered when the adjusted EU reference price exceeds €400/t (£359/t). The three-year bonus will pay 25% of the value above this level.

2021 sugar beet contract offer

  Base price (£/t)    Bonus trigger  * Bonus
One-year contract £20.30                €375/t  (£337/t 10%
Three-year contract £21.18 €400/t (£359/t) 25%

*Bonus is paid on the value over and above this EU-adjusted sugar reference price

Virus yellows fund

At the same time, contracts from 2021 will include a new assurance fund to compensate growers for a proportion of yield losses suffered where virus yellows is present.

Virus yellows is proving a real challenge for sugar beet growers – especially since neonicotinoid seed treatments were banned from the 2019 crop onwards.

Underwritten by British Sugar, the sugar beet processing giant says the £12m three-year compensation fund will cover all new and existing contracts. Growers affected by virus yellows will be compensated if they deliver less than 90% of their contracted tonnage, provided they plant a sufficient area and meet certain conditions.

British Sugar will pay 45% of the value of the shortfall automatically at the end of the campaign, with compensation capped at a 35% yield loss.

NFU Sugar chairman Michael Sly said: “This negotiation has taken place during some very challenging times for our industry, particularly with the ongoing virus yellows issue.”

NFU Sugar had worked constructively with British Sugar to deliver a credible deal which included an assurance fund to help mitigate some of the risk faced by growers.

Futures-linked prices

In addition, a futures-linked variable priced contract will be piloted – enabling growers to make their own pricing decisions for a portion of their contract. This gives UK growers access to the sugar futures market to decide when to fix the price for a proportion of their beet.

The new futures-linked contract pilot will initially be open to up to 100 growers in its first year – with the option to allocate up to 10% of their tonnage on to this contract.

Mr Sly said NFU Sugar and British Sugar had worked hard over the past couple of years to develop a new risk management tool for sugar beet growers. “The innovative futures-based contract, announced as a pilot today, means that growers can – for the first time – price their own sugar beet,” he said.

“In what will be a more volatile world, we believe this agreement helps support a sustainable home-grown sugar industry in the UK.”

British Sugar agriculture director Peter Watson said the new contracts were a competitive package which included a fair price, market-linked bonuses, flexibility and innovation.

“Given the difficulties many growers have faced in recent months with aphids, we are particularly pleased to offer our new virus yellows assurance in the contracts,” he said.

Growers would also continue to see investment in the sugar industry, said Mr Watson.

This included science-led advice from the British Beet Research Organisation, innovation in seed technology and advocacy for plant protection products, and future breeding techniques.

Seed improvements suggested a 5% increase in yield potential, said Mr Watson. An accompanying price reduction meant growers would save about 5% on seed costs.

Industry views

James Black, Suffolk grower

“On the face of it, you would think British Sugar would do more to help growers manage the risk of growing the crop. That said, the fact they are underwriting the virus yellows scheme shows they recognise it is a threat across the whole beet sector.

“So, the £12m compensation fund is welcomed. It is still going to be a struggle – and I hope it isn’t the end of it because the problem remains.

“We grow 230ha of sugar beet and we still need to control virus yellows. Banning neonicotinoid seed treatments was ridiculous.

“Market-linked pricing is interesting. It won’t be the whole answer, but it is something we have been pushing for. It will give us the opportunity to trade closer to the market and I look forward to seeing the details. The existing bonus scheme is a little clunky.”

Michael Sly, NFU Sugar

“The virus yellows threat without seed treatment is extremely challenging. We have also had a perfect storm – a wet winter which affected lifting followed by a very dry spring which affected crop establishment and reduced plant populations.

“To have secured a £12m virus yellows fund for three years to give growers a safety net is a positive way for the industry to work together – to help give farmers confidence to keep growing the crop and for British Sugar to keep processing it.

“Market-linked pricing based on the futures market is an innovation too for the UK sugar sector. We don’t believe it has happened before. Over the next 5-10 years, I hope it develops – but there will always be the element of a fixed price for growers who want to totally manage their risk.”

Ian Munnery, SESVanderHave UK

“It’s a positive offer and the assurance given on virus yellows will give growers sufficient support to continue – but let’s hope and pray we have a cold winter.

“As a seed breeder, we are investing and working hard to develop   solutions. But they are not immediate. The key aspect is that a lot of the improvement in sugar beet yield over recent years has been developed by breeding innovation.

“That in turn is determined by the value of the market that we are breeding for – it defines the investment we are able to make. Hopefully, we will see the UK sugar beet sector maintaining its scale and value so we can continue to develop solutions – including for virus yellows.”

Peter Watson, British Sugar

“We have worked hard with NFU Sugar to deliver what is hopefully a good package for growers – both a competitive offer but also increased flexibility. You’ll see new crop assurance schemes as well and we will build on those in the coming year.

“In terms of investing in the future and innovation, you will see more of that too. There is definitely a new spirit of co-operation. Virus yellows is a serious problem for all beet producers. You only have to look at France this year.

“They have had a very hard-hit winter in terms of virus yellows and that is implicated in the yield decreases they have seen.

“We are working hard in looking at longer term solutions – working with the government to try to level the playing field for EU producers – and this year saw the introduction of the first seed varieties with virus resistance.”

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