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Negotiations are now headed for arbitration

Protracted negotiations into the price paid to sugar beet farmers by British Sugar have again collapsed in acrimony.

A new direct offer to farmers this week by ABF-owned British Sugar had not been agreed by NFU Sugar – the collective representative of sugar beet farmers. It therefore left “the validity of any contract made in relation to this offer in doubt”, the union said.

A costly arbitration process is now underway, while there is uncertainty over future sugar beet supplies from the sector, which could have implications for both BS and its customers.

BS – the sole buyer of British sugar beet – has been locked in negotiations with farmers via NFU Sugar since May, over the price they will be paid for their 2024/25 harvest.

The processor then outraged farmers and the NFU by eschewing normal negotiating protocol by making direct contract approaches to growers at the start of November, prompting Defra to intervene and call on the two sides to continue to follow “well established” price negotiating practices.

The two parties then returned for a fresh round of negotiations on 23 November. 

Talks break down

But in statements issued this week, both blamed the other side for scuppering a deal. A complex proposal for farmers to be able to benefit from buoyant market conditions through placing up to half their contracted tonnage in a futures-linked element (and the structure of such a mechanism) is the key point of disagreement.

Among conditions that were agreed, BS said an “improved” fixed contract price of £40/tonne or £38 plus market-linked bonus had been “aligned” with growers, while the structure of a future contract negotiation process – ensuring growers received a price by July was also agreed, with an “escalation and dispute resolution process ending no later than 31st October, so growers will always have certainty for the following year”.

With the only outstanding term now disputed being the futures contract, BS agriculture director Dan Green said it was “particularly disappointing that an issue which affects so few people – currently just 1% of our grower base – will delay us agreeing an offer which will benefit the vast majority”.

Read more: Sugar farmers furious over British Sugar monopsony

He added: “The futures contract is a high-risk product which has only been attractive to a small minority of growers. We have offered to launch it for next year on the same basis as the 2023/24 price. However, the NFU’s insistence on locking in a fixed discount today presents significant risk to both grower and British Sugar.”

A small movement in the US dollar exchange rate, or world sugar futures price “would present magnified price swings to growers, and potential losses to British Sugar of millions of pounds”, Green claimed, before warning of the costs of arbitration to both parties.

BS would therefore “reopen both the contract and seed order screens on Monday, 18 December so growers can confirm their intentions. More information will follow on this process”, he said.

NFU dismayed

But in response, the NFU slammed BS’s approach, pointing out “nothing is agreed until everything is agreed”, before stating growers “have been clear in their desire for greater economic empowerment, which the futures linked contract delivers”.

Growers “must have the opportunity to opt for a meaningful exposure to the upside in the market, which we recognise could also mean exposure to the downside”, it added, while accusing BS of attempting to undermine NFU Sugar’s statutory role in representing growers and overplaying the potential cost of the futures element – which was “critical to the full benefits of the contract being realised”.

“We have only achieved the significant progress we have made with British Sugar because of the overwhelming unity and support we have had from growers,” said NFU Sugar board chair Michael Sly.

“More than 1,300, representing over 70% of the national sugar beet tonnage, have pledged their support for the vital role NFU Sugar plays in securing a fair sugar beet price for growers. Last week, hundreds of growers attended NFU Sugar meetings to voice their support, and well over 500 letters have been written by growers to their constituency MPs on this issue,” he added.

“British Sugar can be in no doubt of the strength of feeling amongst beet growers and support for NFU Sugar as the growers’ collective representative body.”

Without resolution, the dispute could ultimately be arbitrated by Defra.