Discussions have taken place against the following backdrop:
- Commodity prices falling significantly from the peak levels of 12 months ago.
- Following the larger than anticipated crop last campaign and very good prospects for the crop in the ground, sugar stock levels have reached an unprecedented high. As a result we need to reduce the area of planting required in 2015.
- EU sugar sales prices have been falling as a consequence of the exceptional measures taken by the European Commission to increase the availability of quota sugar in the EU, combined with heightened competitor activity as the industry looks ahead to the reform of the sugar regime at the end of September 2017.
In light of the extremely competitive market place it is essential we all work together to ensure a sustainable and competitive future for the industry.
Key elements of the 2015 crop agreement:
2015/16 contract beet price (CTE) - The CTE beet price for 2015/16 has been fixed at £24 per tonne. This price should provide a good gross margin for those achieving an average yield, in comparison with alternative crops at current prices.
2015/16 industrial beet price - The ICE beet price for 2015/16 has been fixed at £24 per tonne. Growers who hold an existing ICE contract will have that entitlement rolled over for 2015. The ICE price will continue to be set annually at the same time as CTE.
2015/16 surplus beet price - The price for surplus beet will not be announced until nearer to sowing however, to enable growers to plan their contract area appropriately we would like to highlight that it is expected, due to the current levels of excess stock, the surplus beet price will be significantly below the price levels experienced in recent seasons.
Enhanced Transport Allowance
The transport allowance has been reviewed following the end of the 2011 IPA agreement. In recognition of the changes to the regime, the previous Euro linked allowance has been scrapped and an increased allowance linked to the costs of the Industry Haulage Scheme will be paid.
This will include an additional fixed amount for both cleaning and loading. As a result of these changes it is estimated the transport allowance for 2015 will be approximately £1.50/tonne higher than the allowance in 2014.
Industry Haulage Scheme Incentive payment - The NFU and British Sugar are committed to continuing to promote the gains in efficiency that have been achieved by the current Industry Transport Scheme. To that end, growers that have their beet delivered using the Industry Scheme in 2015 will receive an additional payment at the end of the campaign of £1/tonne of adjusted beet.
Contracted Tonnage / Area
Due to the high levels of sugar stock referenced earlier, it will not be possible to continue to contract for the same area of crop in 2015. In order to facilitate a reduction in planned area, four measures have been agreed:
1. Performance rules - to help growers minimise producing excess surplus beet, there will be a relaxation in the contract performance rules so that for 2015/16, growers will only need to deliver a 2 year average of 90% of their contract tonnage over the 2014 and 2015 crops (rather than 95%) to retain their full entitlement for 2016.
2. Contract Holiday – it is recognised that some growers may not wish to grow their full entitlement. For those that wish not to grow either part or all of their entitlement in 2015, but still retain their entitlement for 2016, a one-off ‘contract holiday’ is being made available. This will only be available for a limited tonnage of up to 20% of the national crop and the offer will be closed by 26th August.
3. Possible temporary contract cut – if following the return of contracts, the area is still over-subscribed, it may be necessary to implement a one-off across the board temporary cut in contract for 2015. Any required contract cuts will be applied to CTE and ICE in equal proportions. Growers will be notified of any requirement for an across the board contract cut for 2015 by mid-September 2014.
4. British Sugar’s own beet growing. In the light of the reduced demand for sugar, British Sugar has agreed to reduce the area of beet it grows by 50% in 2015. If there is a contract cut across the board, the British Sugar tonnage will be further reduced in the same proportion.
In response to the recent feedback from the IPA grower working groups, the NFU and British Sugar have committed to continuing to work together on further improving the efficiency of the sugar beet delivery supply chain, and to exploring whether a beet pricing option that is linked to the sugar market place could be available to growers in the future. We aim to have completed this work by the end of the year.
Our industry is having to deal with significant challenges as we face into regime reform and the resulting increased market competition. Both the NFU and British Sugar are confident that despite these challenges and by continuing to work together we will succeed. The package detailed above demonstrates our commitment to work together, enables sugar beet to compete in rotations on farm and ensures British Sugar is able to compete in a competitive market place. We believe it also builds the foundations for a successful future for both growers and the UK beet sugar industry.
Growers can expect to receive their contract offers on-line or by post during week commencing 28th July. If you require further clarification or help in completing your offer, please contact the British Sugar Helpdesk on 0870 2402 314 or the NFU Sugar Helpline on 0870 066 1974.