The Future of East Anglian Sugar Beet
Considering the future of sugar beet in East Anglia, a leading farm business consultant is advising growers to do their sums carefully for 2009 and to think long-term. David Bolton, farm business partner of Cheffins says that, with goodwill, the NFU and British Sugar should find an acceptable price for buying sugar beet from determined growers, anticipating 13½% of UK quota will be cancelled in this round of European reform. But he points out that this price needs to be much more than £20 a tonne if the crop is to remain competitive.
"Just 2.2 million tonnes of quota has so far been surrendered over all Europe in the sugar regime change and another 3.8 million European tonnes still need to go by 2010. So there is still a way to go in the overall European Reform process," says David Bolton.
He points out that the 36% price reduction from £30 per tonne of beet commenced for the 2006 campaign and was moving towards £19.22 per tonne for 2008. De-coupled compensation payments for this followed growers' Single Farm Payments this springtime. About £5.90 per tonne, it was based on 2005's contracted tonnage. Similar payments can be expected again in 2008 and a smaller sum in 2009.
"The Alscott and York factories have closed, releasing 1.2 million tonnes of their beet into East Anglia. This will at least convert previous C beet to main crop prices," reminds David.
"Together British Sugar and the NFU have been trying to maintain a UK sugar industry with scale, efficiency and good long-term prospects for profits, particularly whilst alternative crops were in the doldrums. Yield increases of one tonne per hectare per annum for beet have been achieved by many sugar beet growers through improved technology, though this progress was checked by weather in 2001 and again in 2006/7. Overall it takes less and less land per contract annually and at nearly £700 per hectare for materials and transport alone, the higher the yield, the less the expenditure on materials and the more land can be liberated for alternative profitable cropping," says David.
David thinks that, due to Sterling/Euro movements and animal feed price rises, the current sugar beet price should now average £24 per tonne, including transport and bonuses before any de-coupled compensation is received.
"British Sugar is eager for every tonne of beet next year with full payment guaranteed on every tonne delivered for 2008/9. Whilst contracts have been cut by 10%, British Sugar promises over £20 per tonne again before transport and bonuses. Compensation is yet to be confirmed."
The situation has been further complicated by the RPA Grower Initiative. David explains that the RPA mailed all growers their least-clear missive yet on this last weekrecently. "Where over 10% is offered for cancellation, final decisions rest with the processor, the Government and the NFU, not the grower. British Sugar has confirmed 13½% shall go and expects this to produce a one-off payment for all beet grown next year paid over and above these figures. The mechanism of this payment has yet to be fully revealed, with suggestions of £3.50/tonne!"
According to Cheffins, the cereal price escalator will be re-visited for 2009/2010. "Originally agreed between British Sugar and the NFU to provide 50 pence per tonne per £10 of feed wheat price rise movement, it was fine when cereals were less than £75 per tonne. But the escalator only reaches £95 per tonne! We are expecting renewal of this escalator, perhaps linked to the wheat futures price. Otherwise Wissington, Cantley and Bury St Edmunds will have no beet crop to slice, particularly as alternative crop prices remain near recent highs."
"So what about alternatives to sugar beet? It must be borne in mind that volatile prices are only welcome when they rise. Falls may be expected, particularly in proteins and other break crops depending on the weather or politics. The areas being planted to wheat across the globe this autumn should generate a substantial world crop, given reasonable weather. Overall UK 2007 losses need to be made up and costs are rising. Winter beans and spring barley are still attractive alternatives and are easy to grow. However some East Anglian sugar beet land is unsuitable for beans and some beet land has been over-cropped and suffers badly from weedy beet," warns David.
"Sugar beet could remain an important break crop in East Anglia, but only if the price is right. I would advise growers to do their sums carefully for 2009 – not easy when all the criteria have yet to be finalised. And to make their decisions based on the longer term. I am hoping that with goodwill, the NFU and British Sugar should find an acceptable price for sugar beet, and that this price will be over £20/tonne."
