Defra has called on the sugar beet sector to continue to follow “well established” price negotiating practices after British Sugar was slammed by the National Farmers Union for making direct approaches to farmers.
The NFU had written to farming minister Mark Spencer last week to urge him to intervene in the long-running pricing dispute between sugar beet growers and British Sugar. Written by NFU president Minette Batters, the letter outlined the “shock” and “deep frustration” of the union after a direct and “unilateral” approach to beet growers with a price proposal by British Sugar last week – in contravention of the established process of price negotiations.
NFU Sugar is the government-appointed body which represents the interests of the UK’s more than 2,000 sugar beet growers in negotiations with ABF-owned British Sugar (BS) – which is the sole buyer of their produce and operates as an effective monopsony.
The approach was described as “a violation of the vital protection which the NFU provides to growers, who are now left vulnerable as price takers to the only buyer in the market”, Batters said.
BS’s actions had represented “an abrupt and unprecedented departure from the established practice for the negotiation of sugar supply terms which has been in place for many decades”, she added, as she halted negotiations.
In response to the NFU’s request for intervention, Defra said on Tuesday (7 November), it was “very important all parties involved now continue to follow that process and reach a mutually acceptable outcome”.
More than 800 growers had joined an emergency online meeting convened by NFU Sugar last Friday to discuss BS’s direct price proposals, with Batters’ letter to Spencer stating many beet farmers had been left “angry and confused” by the ongoing dispute.
Without a resolution to the pricing impasse, growers have warned they could switch to other crops for the 2024/25 season, which could ultimately lead to a shortfall in sugar supply, forcing BS to have to import raw cane sugar for processing and adding further inflationary pressure to sugar prices.
Following months of deadlocked negotiations over a price for the 2024/25 harvest, a separate statement by NFU Sugar Board chair Michael Sly spoke of the union’s “outrage” at the tactics of BS.
Sly added “this aggressive action – in circumventing NFU Sugar – was undertaken in the hope that individual growers will accept a contract that gives them significantly less value than they should receive given anticipated market conditions”.
The increasingly rancorous price dispute has been rumbling on since May. It led the NFU and BS to appoint a professional external facilitator last month in a bid to find a way through the deadlock.
This followed British Sugar’s offer of £38/tonne for the 2024/25 beet season, a figure that was lower than the £40/tonne price for the current season, despite soaring production costs and high global sugar prices.
BS’s approach to growers last week stated its price offer, which had the added potential of a market-linked bonus taking it over £40/tonne, had been built around “choice and flexibility”. Growers could also choose from a Yield Protection contract with a core price of £37/tonne, with cash advance options also available in a package of proposals described as “competitive” by British Sugar agriculture director Dan Green.
“I am sorry to say that, despite our best endeavours and months of negotiation, we have not yet been able to agree a price and full terms and conditions with NFU Sugar,” Green added.
“We will continue to work through the negotiation and dispute resolution process with them. However, we know that as we are now at the start of November, growers need the financial security of a contract and the certainty of a guaranteed price as soon as possible.”
In response to British Sugar’s offer, NFU Sugar said it had “not agreed this offer, leaving the validity of any contract made in relation to this offer in doubt”.
Batters’ letter also questioned the validity of any offer to individual growers, given how it was “not permitted under the relevant legal and regulatory framework”.
If pricing negotiations remain deadlocked, Defra ultimately has the statutory right to step in under section 69 of the Food Act, which grants ministers the power to determine or designate a person to determine those prices, terms and conditions.
“BS’s total disregard for the integral role of the NFU in counteracting BS’s monopsony power and its deliberate circumvention of the statutory process make it impossible for this year’s negotiations to continue,” Batters added.
“Consequently, we request that Defra exercises its powers under section 69 to determine the terms for supply for the 2024/25 contract year.”
In its response to the NFU demands on Tuesday, Defra also stressed it was “committed to promoting fairness across the food supply chain, with risk and reward being properly shared”.
This “includes seeing a price agreed for sugar beet that benefits both growers and processors, in the context of the global market” a spokesperson for the government department added, while stressing it only acted as “a final arbitrator at the end of the process should no agreement be reached”.
The NFU “welcomed the clear direction from government” that negotiations with British Sugar should resume.
“Government direction could not be clearer. NFU Sugar is ready to resume the negotiation process that British Sugar bypassed last week. But that price-setting process cannot function effectively whilst British Sugar is, at the same time, making unilateral offers to beet growers outside of it,” it added.
“When British Sugar retracts its current sugar beet contract offer made to growers outside of the established process, NFU Sugar is ready to resume the negotiation process that the company bypassed last week,” it said.
British Sugar responded by saying it “remains fully committed to getting a price agreed with the NFU for the 2024/25 beet price negotiations. We therefore welcome the statement from Defra yesterday”.
The processor added it had “already reached out to the NFU to make sure that negotiations can re-start immediately”.
A spokeswoman for the business had told The Grocer earlier this week that growers had been calling for the security of a contract. She also pointed out there was “no downside” to its offer as BS would “honour any negotiated outcome”.