The recent beet price announcement has given growers a choice, something which, during the growers meetings, was asked for. The Options are:
- One year contract, beet price: £22/t guaranteed minimum, plus market bonus (10% share of the sugar market revenue above €475/t).
- Three year contract, beet price: £22/t guaranteed minimum, plus market bonus (25% share of the sugar market revenue above €475/t) for each of the 2017/18, 18/19 and 2019/20 crops.
The choices align beet price in the UK with the European sugar price and offer an option of longer term contracts. Growers now must decide whether they opt for a longer term fixed minimum price with a larger share of uplift or a one year price with a smaller share. These decisions are being made daily in arable farming businesses across the country with regard to most other crops -
· Should we fix now to aid investment decisions?
· Is there a possibility of the market price rising in future years?
· What is our view on risk?
Ultimately the decision of which crop to grow comes down to a number of factors, and to take a very simplistic view:
· Which crop can we achieve the greatest margin?
· Which crop are we invested in? (ie Does your business operate a beet harvester and drill);
· Which crop fits into and adds to our rotation?
British Sugar is competing for land area and wants to secure over 100,000 hectares of beet annually. If the relative price of others crops increase the attractiveness of those crops when answering the first of those questions also increases. So our decision on farm must reflect our views on the global commodity prices, the prices will inevitably fluctuate and so provide opportunity for some.
So a choice; those wishing to balance risk and investment decisions now have that option, those with a bullish view of the global commodity markets may opt for the annual price negotiation. With a maximum of 30% of the national contract tonnage available on a three year contract, growers wanting to take advantage of this offer will need to act promptly when the contracts are available from early next week.
What is evident is that we have is an industry that is listening to growers, an industry which reflects their views and is pushing forward in order to be best placed for life without quotas and a more challenging market place.
We support the linkage, and we see weaker Sterling as a result of Brexit over the next 1-3 years helping British Sugar's competitive ability in Europe. We also expect other crop prices to rise globally. Those 2 factors are likely to apply rising rather than falling price pressure on UK broad acre farm crops and so increased competition for area allocated to beet in years 2 and 3. The elephant in the room is the risk of loss of support as a result of Brexit and increasingly all farmers will look to an economically sustainable crop mix that provides a positive return to meet rent or land ownership costs. We see it important in East Anglia that a shared 'pain and gain' model for beet ensures that beet has a long term future.