Farmers have accused the processor of a ‘greedy abuse of power’
Not for the first time in recent years, sugar beet farmers are at loggerheads with British Sugar – the sole buyer of their produce – over the price they are paid.
As The Grocer reported last week, global sugar prices are at all-time highs.
Driven by the impact of poor weather conditions on both European beet crops and sugar cane production in the likes of India and Brazil, prices jumped by 35% year on year during 2023’s third quarter, to an average of $0.54/kg, according to World Bank data.
Given this huge price increase globally, the 3,000 or so British farmers who grow sugar beet as a rotation crop argue they are not set to benefit enough from the inflated market. Unlike most agricultural commodities, British sugar beet operates in an effective monopsony, where due to the impracticalities of exporting such a bulky crop, ABF subsidiary British Sugar is effectively the only processor buying from British producers.
It sets a price for the crop through an annual (and often protracted) negotiation with farmers, represented by the NFU, as part of a government mandated process designed to maintain market balance.
The processor paid out £40/tonne for the current 2023/24 crop in the wake of the input price inflation that has gripped the food sector, but it has so far offered less than this for next year’s harvest, provoking the fury of farmers, who are accusing the processor of being “greedy” and unwilling to share market benefits with producers.
Conscious that negotiations are ongoing, the union declined to comment on the impasse this week. However, a letter sent from NFU Sugar to members on 6 September, published by East Anglia-based arable farmer John Collen on X/Twitter, makes clear its frustrations.
The letter, from NFU Sugar board chair Michael Sly and vice chair Simon Smith, describes the price currently on the table – understood by The Grocer to be in the region of £38/tonne – as “wholly inadequate”. It says farmers would also be subject to “additional demands on growers which NFU Sugar feels unable to accept on your behalf”.
NFU Sugar “believes both growers and British Sugar can make significantly more money than in previous years” due to the current market conditions. The terms currently offered “would leave growers (and ultimately our industry) weaker in the longer term”, the letter adds.
The situation is said to have translated into a “battle” between British Sugar reps – led by new MD Keith Packer, who joined in June – and beet farmers.
Collen says the price proposals amount to an “abuse of power” by the processor.
Ultimately, growers just want a “fair price, reflective of the market” says Collen, pointing to equivalent spot sugar prices, currently at around £60/tonne or even higher in some circumstances.
Sharing the spoils
The sector accepted the need for a low price when the market collapsed five years ago, falling to the £20.42/tonne mark, Collen argues. Having made losses for a number of years it needs to experience some of the upside too. Additionally, UK growers are hamstrung by the fact they are only permitted to trade a small proportion (20%) of their crop’s value on futures markets under an agreement with British Sugar.
British Sugar is circumspect on its position, with agriculture director Dan Green stressing the business is “committed to the homegrown sugar beet industry” and negotiations are “in good faith”.
“We are confident our current proposal offers a very attractive return to growers, with a competitive margin when compared to other crops,” he adds.
If no agreement on price is arrived at soon, growers could decide to switch to another crop for the 2024/25 season, which could lead to a shortfall in British beet production – something British Sugar experienced as recently as this year, when it was forced to import the commodity from arch-rival Tate & Lyle Sugars and others further afield to meet its commitments.
Such a move could also add further inflationary pressure to a commodity that’s already at sky-high prices.