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Ahead of the event we would like to take a few minutes to read the briefing below which will cover the items that will be discussed on the day. A pdf is also attached below this article if you would prefer to read it in that format.
GROWING BEET AFTER QUOTAS – THE OPTIONS
An Industry Event (November 13th 2015)
EU sugar production quotas will end on September 30th 2017, which means the crop planted in the spring of 2016 will be the last under this system.
Under the current quota regime, EU grown sugar for human consumption is limited to 13.5 million tonnes (mt), with the UK’s share of this at just over 1mt. Imports of up to 3.5mt complete the EU’s requirements. Strict rules govern how additional production can be used (i.e. ICE and surplus). Exports from the EU to the rest of world are restricted to 1.4mt.
When quotas end, the EU can produce as much sugar as it wants. Export restrictions will also be lifted, although the current import rules will be maintained. The minimum beet price payable to growers of €26.29 (£19.10) will also be abolished as will the EU reference price of €404/t.
How will the EU market develop? Predictions point to an expansion of sugar production across the EU in the post 2017 arena, particularly due to export restrictions being lifted. The European market is expected to align with and be influenced by world prices. These can be volatile and have recently fallen to seven year lows (see graph).
How should we respond as an industry? NFU Sugar and British Sugar acknowledge that the post quota environment will be different than today, and that it will carry risks and opportunities. We want to establish whether providing a choice of contracting options is of interest to growers, compared with the single price arrangement existing now. The event at the East of England Showground on November 13th is designed to explore potential contracting arrangements with growers. We would like to hear your opinions and perspectives on the day.
In preparation for the event please can you consider the following?
What about contracting options? NFU Sugar and British Sugar want to know your views on beet pricing and your preference for risk and reward. Can you give some thought to the following pricing possibilities because they will be discussed at the event. The list below is by no means exhaustive.
(i). Current status quo. An annual price negotiation, in advance, with the price for the crop set about nine months before sowing.
(ii). Market derived price link. An opportunity to benefit from price changes in (a). EU or world sugar prices or (b). Alternative crop prices. Growers could be offered a basic guaranteed beet price, plus a potential premium, should the sugar price or alternative crop prices exceed a predetermined threshold. Different basic beet prices could be available to reflect a growers’ appetite for exposure (and potential returns) from the market.
(iii). Contract length. Pricing length could vary, from one campaign as seen at present to long term contracts. This may enable the grower to plan ahead and mitigate risk and manage volatility.
We would also like to know if you have any other ideas on contracting options and/or any significant non-price issues that are influencing your decision to grow.