Future of Beet Growing

There is likely to be increased flexibility in sugar beet contracts following the end of EU sugar beet quotas in 2017.  This was one of the main messages to come out of a growers meeting hosted by the NFU in Peterborough on the 13^th November.

Production quotas end across the EU on the 30^th September 2017, this means that the 2016 crop will be last grown under the present regime.  Thoughts are turning to what post-quota beet pricing arrangements may look like.  The internal EU sugar market will still be protected from imports by tariffs and quotas, but there will be no restrictions on how much sugar the European industry can produce.  The fear is that production will increase leading to more competition and lower prices (at least in the short-term). 

Some key points to come out of the meeting;

• British Sugar (BS) will still contract with growers for a volume of beet (i.e. there will be no free-for-all).
• There will still be an Inter-professional Agreement (IPA) as this is part of the EU legislation.  Therefore the NFU will continue to negotiate on behalf of all growers.
• The status quo option of a fixed price beet contract agreed in advance will remain as a choice for growers.
• Alternative pricing arrangements are being looked at.  This could link growers’ return to the sugar market or the profitability of alternative arable crops.  It is clear that such mechanisms are not simply going to be a supplement on top of a remunerative basic beet price.  When markets are low, growers will be expected to take some of the pain, as well as sharing in the gain in good times. 
• The price paid for beet may alter depending on delivery date.  In effect, growers may ‘bid’ for the most popular slots by accepting a lower price. 
• Longer-term contracting (more than one year) is a possibility.
• Depending on the final options available, growers will be able to mix-and-match the options to some extent – i.e. they do not have to just chose one. 
• Existing growers will have first refusal on tonnage. 
• The BBRO will continue to be jointly funded by the NFU and BS.

Due to the improvement in efficiency in the sugar beet industry over the last few years (both at grower and processor levels) it is now believed that beet sugar can be competitive with cane – given the right set of economic circumstances such as exchange rates, oil prices etc.  There is thus a possibility that any extra EU production could find a home on world markets, but this would likely be at a price much lower than the historical internal EU price.  Growers may have to accept that prices for sugar beet will be in the low twenty Pounds per tonne for the foreseeable future.  There is likely to be considerable market disruption in the short-term as the major EU processors fight for position, and it may be a number of seasons before a new equilibrium is found.  The French and German sugar industries have significant excess factory capacity, so it will be relatively easy for those countries to increase production.  If the market is difficult, the co-op model may allow them to tolerate processing losses for longer.  It remains to be seen whether BS will want to stay in the fight if there are no profits for a sustained period.  The processor gave no promises that all four current English factories would stay open.