Beet Price Drop for 2015

Sugar beet growers face a substantial drop in price for the next growing season.  Negotiations between the NFU and British Sugar have fixed a price of £24 per tonne for the 2015 crop (2015/16 marketing campaign).  This is a substantial drop on the £31.67 growers will receive for their 2014 crop (24% down).   The industrial ‘ICE’ beet will also be paid at £24 per tonne.  The surplus (‘C’) beet price has not yet been set but producers have been warned that it will be ‘significantlybelow the price levels seen in recent years’.

A number of factors have come together to cause this drop.  Firstly commodity prices have dropped across-the-board, meaning that alternative crops to beet now look less attractive.  Global sugar prices have fallen dramatically since their highs of a couple of years ago.  This has put pressure on EU prices at the same time as EU output has risen in anticipation of the end of quotas in 2017.  Furthermore, Sterling has strengthened, putting pressure on UK sugar prices.  Lastly, after a few good years (and the current season also has the potential to deliver high yields), British Sugar is holding high stock levels.  

On this last point, British Sugar is looking for a lower planted area in 2015.  This is to be achieved through a number of measures;

• the contract tonnage performance rules will be relaxed so that growers will only need to deliver a two-year average of 90% (rather than 95%) of their CTE in 2014 and 2015 to retain the full allocation for 2016
• a contract ‘holiday’ will be available covering 20% of the national CTE.  Growers have until the 26th August to opt not to grow all or part of their entitlement for 2015, without the loss of CTE
• if these measures do not work, there may be an across-the-board cut for all growers for 2015.  This will be notified by mid-September
• British Sugar is to do its bit by reducing the area it self-grows by 50% for 2015.  On top of this it will also be subject to the general contract cuts if they are applied.

Some better news is that the transport allowance is likely to be £1.50 higher per tonne than that for 2014.  There will also be an incentive of a further £1 per tonne if growers use the Industry Haulage Scheme to have their beet delivered.  More long-term, the NFU, British Sugar and grower groups are looking a pricing mechanisms for 2016 and beyond.

This price is obviously a big drop on the figure being paid for this year’s crop, and many growers will be irate.  However, it can be argued (with the benefit of hindsight!) that the 2014 price is too high based on the market fundamentals we now have.  British Sugar is effectively stuck with paying a very high price for sugar it doesn’t necessarily want.  Therefore a big adjustment for next year was always on the cards.  With the relaxation of the performance rules, no doubt the position of the processor will be ‘if you don’t like it, don’t grow it’.