2020 Sugar Beet contract: what does it mean and how will it affect the industry?
The NFU and British Sugar have announced terms for both a one-year contract, and a three-year contract for sugar beet growers. On 18 September, the NFU reported the terms of the contract: “A one-year contract will be offered for 2020 at a contract price of £19.60/t” and, “a three-year contract will be offered for 2020-22 at a price of £20.45/t.” This marks the first time since 2017 that there has been an option for a three-year contract.
How does the contract compare with recent years?
The one-year contract is an increase on last year’s price of £19.07/t. However, when we compare with the terms from 2017/18 and 2018/19, (£22.00/t and £22.50/t respectively), a trend of falling prices emerges. When announcing the contract, British Sugar continued to maintain that their priority was to “deliver the fairest possible deal for growers and the processor.”
This comes at a time when many farmers were hoping for greater support from the NFU during the negotiations, with one stakeholder stating, “I don’t think the growers are militant enough.” Many growers were already aggrieved with the late agreement of the contract, arguing that it is too late in the year. As this contract announcement has been further delayed, beet growers will legitimately feel that it has not provided them with enough time to thoroughly evaluate their harvest options.
To that end, the 2020/21 contract terms have been released amidst a backdrop of problems for British growers. Foremost among these has been the loss of key agrochemicals, including neonicotinoids – banned by the EU in 2018. (You can find out more about these insecticides in a previous blog post, here.) This ban has been compounded by an extremely hot summer, resulting in low yields. With these factors in mind, British sugar beet growers were hoping to be compensated with a greater increase in contract terms.
Potential consequences for the British sugar industry
Colm McKay, British Sugar’s Agriculture Director, claims that the 2020/21 contract is ‘more attractive’ – many growers, however, would be inclined to disagree . For instance, at face value, the three-year contract appears to be more beneficial because it provides growers with price security for those three years. However, when growers are annually reassessing whether sugar beet is the most viable product for their land, many will be hesitant to be tied down to a three-year contract.
Richard Allison, editor of Farmers Weekly, has predicted that many sugar beet farmers will start to look at other crops instead, stating ‘there will be no let up next season and the crop is starting to look less attractive.’ This is a view echoed by many contributors in The Farming Forum, pointing to possible future issues for British sugar beet.
Contract negotiations also took place against a backdrop of a relatively tumultuous global sugar market. World prices have fallen to a ten year low and there is a global surplus of sugar, with these highly accumulated stocks needing to be absorbed by the market before we can see any improvement in price. Recent activity points to a recovery in the global price of sugar and if this trend continues, British beet farmers may hope for more favourable terms in the 2021/22 contract.