NFU Sugar and British Sugar have today announced both a one-year and three-year sugar beet contract terms for the 2020/21 crop and beyond, including a reduction in the paid mileage cap at the Newark sugar factory.
A one-year contract will be offered for 2020 at a contract price of £19.60/tonne, with no crown tare reduction and based on the current sugar content payment scale. This is equivalent to a price paid of £20.99/t on a crowned basis.
A three-year contract will be offered for 2020-22 at a price of £20.45/t, with no crown tare reduction. This is equivalent to a price paid on a crowned basis of £21.90/t in year one and an equivalent £21.18/t in years two and three.
Both contracts will offer a bonus price for growers, which triggers if the EU-reference price for white sugar reaches a certain value. For the one-year contract, if the reference price reaches €375 per tonne, growers will receive a 15 per cent share of the price above that point. For the three-year contract, if the price reaches €400 per tonne, growers will receive a 25 per cent share of the price above that point.
A maximum of 65 per cent of the total, national contracted volume will be available on three-year deals in any combination, on a first-come-first-served basis.
NFU Sugar board chairman Michael Sly said: “Considering the difficulties and uncertainty facing growers now and into the future, it is important that a price has been agreed that recognises the risks and costs now associated with growing sugar beet.
“With these new contracts, growers will receive a greater benefit from any uplift in sugar prices than in current deals and our agreement ensures that these bonuses will not be compromised by Brexit.
“We are committed to improving transparency in the supply chain and ensuring growers are paid fairly for their produce and the removal of the 0.02 per cent price reductions in measured sugar content on beet tested demonstrates that.”
The paid mileage cap at Newark will reduce from 60 to 55 miles in 2021 and 50 miles in 2022. The cap will remain at 60 miles for all other factories. If contract volume is available at Newark, growers contracted to Wissington above 60 miles but closer than 50 miles to Newark will have first refusal on the option to transfer their contract to Newark ahead of this tonnage being offered elsewhere.
Mr Sly says: “We are disappointed that there is a reduction in the mileage cap in the Newark factory area but this is unfortunately a reality of the new market. We hope the gradual cap reduction will give affected growers the extra time necessary to realign their businesses.”
British Sugar agriculture director Colm McKay says: “We’re pleased to have reached this agreement with NFU Sugar and believe it offers growers both certainty and choice. Many growers were asking us for a new three-year contract, and together with NFU Sugar, we have delivered that. Both the one-year and the three-year contracts benefit from market bonus triggers, allowing growers to share the benefits when the sugar market performs well.”
Jason Cantrill, farm consultant in the Norwich office of Strutt & Parker, says: “Growers will need to get to grips with their costs of production in order to make an informed decision.
“The figures do appear to throw into question the future of sugar beet on those farms where it is hard to consistently achieve high yields.
“While some growers are able to grow sugar beet for around £18/t, we know it is costing others closer to £25/t before rent and finance costs are taken account of. On this basis, the agreed prices suggest a small margin for some and a potential loss for many.
“Top-performing growers who can consistently hit yields of 85t/ha or more will be able to make money, but growers struggling to achieve high yields will question the viability of this crop. Yield is king.”