IPA REVIEW LONG OVERDUE
An overhaul of the sugar beet contract is long overdue. But negotiations are proving difficult, as Gilly Johnson reports.
SUGAR beet is a good earner for both British Sugar (BS) and growers. So why does constant squabble mar what should be a profitable partnership?
The answer lies in history: 1968, when the Inter-Professional Agreement (IPA) was devised. This is the commercial contract binding beet growers and BS.
The IPA was put together to set the ground rules for both sides, because as the only buyer of sugar beet, BS would otherwise have had the upper hand. The NFU accepted the role as growers representative in negotiations.
But 30 years on, the IPA is showing its age, despite some tweaking in the interim. Technology and agronomy have moved on, and both sides agree that the old contract is no longer relevant. Instead it is a distorting and strangling progress. Its not just producers and processors who are suffering its effects; the IPA has an indirect impact on plant breeders and machinery manufacturers as well.
Negotiations to update the IPA have been under way since 1994. But progress is slow. Neither side is prepared to comment publicly on the detail of the debate, for fear of jeopardising bargaining positions. But it is clear that deadlock over certain issues is proving hard to overcome.
• Crown tares
High on the list of growers concerns is the lack of payment for sugar in crown tares. This topic generated most arguments during a series of regional grower meetings, run by the NFU last winter.
The NFUs position is that the sugar contained in plant crown material, which is sliced off at the factory tarehouses and processed, is now worth a lot to BS. But payments are made on the basis of sugar contained in the cleaned and topped beet only.
"Work undertaken by independent scientists shows that the amount of extractable sugar contained in the crown has increased by nearly 40kg/t of beet delivered since the 1970s," according to an NFU statement. "This sugar contributes to the achievement of our national quota but is not included in the amount purchased – a significant and increasing benefit to BS. Growers cant afford to subsidise the processor in this way."
Not surprisingly, BS does not want to pay extra for the sugar which it extracts from crown material. The company states: "There is no free sugar in crown material – its value is already accounted for in the price paid to growers for clean beet as determined in the tarehouse."
If BS were to pay up, it would distort the current balance of the contract in favour of growers, suggests the company. Instead BS wants to focus on a developing a new contract that would help both sides – and would not force either party to lose out.
One solution might be for growers to deliver pre-topped beet by setting the harvester to cut lower, but this risks losing yield, particularly if crops are uneven. Better designed topping machinery would help.
Up to now, growers have been responsible for transporting beet to factories. Within the beet payment is a transport allowance based on the weight of clean beet delivered.
BS suggests that industry savings of £5m could be possible if the company took over haulage management. They promise better co-ordination of collection arrangements, and economies of scale. These savings would be shared with growers, the company proposes.
The NFU is opposed to this idea. First, it disputes BS projections for potential savings. Second, beet haulage helps justify the cost of many farm lorries, so the NFU wants to keep options open for growers. Any changes to haulage arrangements should be voluntary, it says.
• Contract trading
Both parties agree that quota trading would help the industry. But there are dangers in introducing such a system. The NFU is nervous about what parameters BS might use to withdraw quota from growers. It is opposed to quota cuts on the basis of C beet production.
Its position is that "re-allocation of quota must be based on objective criteria, and BS should not be allowed to intervene too heavy handedly. Market forces should be left to operate freely to achieve a rational quota allocation".
• Quota siphoning
When farm businesses change their legal status they can lose 30% of quota. This practice is much disliked by growers and BS is offering to abolish it. The company suggests that instead it might bring in a reward system for growers who regularly fulfil their contracted tonnage, using a "two years out of three" revised contract performance rule.
• Sugar content and beet purity
The structure of the present payment system means BS loses out with higher content sugar varieties, because it has to pay relatively more. This has led to problems with varietal choice. Up to now, plant breeders have been discouraged from targeting high sugars and instead are pushing for higher yield.
BS wants the payment system revised and suggests that extra quota might be made available as a reward to growers producing high sugars.
The NFU says that only rarely do growers benefit, and this is when sugar contents breach the 18% mark.