Terms of the deal brokered by British Sugar and the NFU

Contracting process

British Sugar said that on or before June 30, in each contract year, the company will issue a Form of Offer to every grower confirming the level of contract entitlement, and a firm price based on a new price mechanism.

Growers will have until August 13, in which to respond and, upon receipt, British Sugar will send out a Form of Notification and the contract will become binding.

Pricing mechanism

Sugar beet growers have been told a likely price they will be paid for their 2011 crop is £24-£25/tonne, calculated upon a new pricing mechanism set on the four key elements of: direct costs, fixed costs/overheads, currency fluctuation and a wheat-related bonus.

Once offered, in the latter half of June each year, the price will be fixed and cannot change. The model, to be agreed on an annual basis, will take into account the varying costs of seed or fertiliser, for example, and build this into the full price paid for the crop.

All fixed costs of production and overheads will be set on a flat rate of £357/ha (£145/acre) for the duration of the agreement, and are based on the five- year yield average of 67.78t/ha (27.42t/acre).

All currency risk is switched  to British Sugar under the new IPA and a currency-related margin would be calculated annually by reference to the forward currency rates maturing in September the following year.

To ensure the crop remains competitive with broad-acre arable crops, a wheat-related bonus will be added to the beet price when the feed wheat price rises above £110/t.

All the mechanism’s direct costs will be calculated this month and the currency and wheat related elements 10 working days prior to June 15.

Outgoers’ Scheme

British Sugar has agreed up to £7m is to be invested by the company to fund an Outgoers’ Scheme for those growers wishing to surrender contract, however, it will be based on a system linked to growers’ five-year average beet yields and relative distance to a factory.

Growers with a five-year average beet yield below 45t/ha (18t/acre) will have access to compensation to sell, and those below 60t/ha (24t/acre) may also qualify for Outgoers’ compensation, depending on distance.

In order to qualify for the Outgoers’ package, the seller must find a qualified buyer, either above 65t/ha yield, or low mileage (who has been notified by British Sugar he qualifies to buy within the Scheme).

Sellers of quota could receive up to £15/t, depending on their situation, but as an extra incentive, they will receive payment for a further 0.5 tonne of permanent contract tonnage on every tonne they sell.

British Sugar said it is looking to place up to 300,000 tonnes of permanent tonnage through the scheme, but it points out to growers there is no guarantee  temporary contract tonnes will be available for 2011.

Because of an over supply of beet to the Newark factory, growers who supply it can sell to any grower, but can only buy from another Newark grower.

All growers will receive an Outgoers’ information pack in mid-June, before contracting starts at the end of June.

Crown tares

British Sugar and the NFU have agreed trials will take place this season to achieve a fair crown tare system for growers. There will, however, be no change for the 2010 crop.

The plan is for a fixed tare to be agreed and any crown delivered above this will be to the growers’ accounts, and paid at the full contract price.

BBRO advice is an extra 2 per cent yield could be achieved.

Transport initiative

Launched earlier this year, and based on recommendations from EEDA/EMDA, a transport initiative trial will be undertaken at Newark and Wissington during the 2010/11 campaign.

The voluntary scheme, instigated  by British Sugar and the NFU, will offer selected growers an ex-farm contract whereby British Sugar will load, clean and deliver beet from field to factory, essentially managing and paying for all transport costs.

To date there has been 500,000 tonnes worth of ‘interest’ from growers, said British Sugar, who claimed that negotiations with hauliers is on-going.

The initiative will be reviewed after the first year and, if successful, would be extended (still voluntary) with British Sugar equivalent transport costs being paid to growers hauling their own beet.

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