News Sugar beets
British Sugar launches beet futures contract
British Sugar, the only beet processor in the UK, has presented arable farmers with the 2021 cultivation contract. Growers were already aware of the option for a 3-year contract, but they will also receive a futures market contract. In addition to a price increase, the company will financially compensate growers when the yield is lower as a result of the yellowing virus.
Also in England beet growers have had to do without the seed coating with neonicotinoids since 2019. As a result, beet crops suffer from lower sugar yields as a result of the yellowing virus, transmitted by aphids. Growers who experience damage can claim the 'Virus Yellow' insurance scheme. British Sugar is making £12 million (€13,32 million) available to offset existing and new contracts over the next 3 years. Details about this are still unknown.
Slight increase
The beet contract for the 2021 harvest year has a small price increase and comes out at €22,53 per tonne of beets. For the current vintage, a price of €21,75 per tonne is paid at the current exchange rate of €1,11 per pound sterling (£19,60 this year versus £20,30 next year). For a 3-year contract, the price is €23,50 per tonne.
British Sugar has had a bonus system for some time when the EU reference price for white sugar exceeds €375 (1-year contract) or €400 (3-year contract) per tonne. Of the plus above this amount, 10% is paid to the grower, for the 1-year contract, and 25% for the 3-year contract. An example: The sugar price for the 2021-22 season is €420. Growers will then receive 25% of €20 = €5 on top of the €23,50. After the UK has left the EU, a comparable British price indication for sugar will be used to support the market bonus.
Plus above 16% sugar
The prices mentioned are paid for one tonne of net beets at a sugar percentage of 16%. Growers above that are rewarded extra and are cut below this percentage. Calculated with the usual 17% in the Netherlands, this means that growers are settled on approximately 1.100 kilos of beets, instead of 1.000 kilos. This means a price advantage of € 2,25 per tonne on a 1-year contract.
The so-called futures-linked variable price contract is new. This is a pilot that British Sugar and the representative NFU Sugar have devised together and have been working on it for several years. This contract is intended as a risk management tool, says NFU Sugar chairman Michael Sly. This allows growers to determine their beet price themselves. Details of the sales method have not yet been disclosed by the parties, but their set-up appears to be similar to that of click contracts on the potato futures market, where growers use the sugar futures price as the basis for their beet price and lock their payout price on it during the season.
Taking advantage of volatility
The pilot will be opened for a maximum of 100 growers for next harvest year. They can sell up to 10% of their tonnage to British Sugar in this way. Sly sees the futures contract as a good opportunity to take advantage of volatility in the global sugar market. With the addition of the contract and the support fund for the yellowing virus, according to British Sugar director Peter Watson, the company offers every grower an opportunity to grow beet profitably.
Niels van der Boom
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