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Ground-breaking changes announced in the 2021 sugar beet contract offer

24 August 2020

British Sugar and NFU Sugar are pleased to have concluded negotiations for one-year and three-year sugar beet contracts from 2021, including a ground-breaking new Virus Yellows assurance fund and an innovative futures-linked contract pilot.

The Virus Yellows crop assurance fund introduced from 2021 will compensate growers for a proportion of yield losses suffered where a grower has Virus Yellows present in their crop. This is a three-year, £12 million fund, underwritten by British Sugar covering all new and existing contracts.

The one-year contract for 2021 will pay £20.30 per adjusted tonne, with a market bonus triggered when the adjusted EU reference price exceeds €375/t. The bonus would pay growers 10% of the value above this level.

The three-year contract for 2021-23 will pay £21.18 per adjusted tonne, with a market bonus triggered when the adjusted EU reference price exceeds €400/t. The bonus would pay growers 25% of the value above this level.

The base contract prices are equivalent to those in the 2020 contract.

In addition, NFU Sugar and British Sugar have agreed to pilot an innovative futures-linked variable priced contract, giving growers the ability to make their own pricing decisions for a portion of their contract. Growers will have access to the sugar futures market for the first time in the UK in order to decide when to fix the price of beet on this contract.

NFU Sugar board chair Michael Sly said:

“This negotiation has taken place during some very challenging times for our industry, particularly with the ongoing Virus Yellows issue growers are facing.

“NFU Sugar has worked constructively with British Sugar to deliver a credible deal which includes a ground-breaking Virus Yellows assurance fund, to help mitigate some of the growers’ risk.

“We have also been working hard over the past couple of years, to develop a new risk management tool for growers. The innovative futures-based contract, announced as a pilot today, means that growers can - for the first time - price their own sugar beet.

“This deal builds on the work of previous years in providing greater transparency and lays stronger foundations for the future. In what will be a more volatile world, we believe this agreement helps support a sustainable homegrown sugar industry in the UK.”

British Sugar Agriculture Director Peter Watson said:

“Our new contracts offer a competitive support package for each and every grower, which sees a fair price, market-linked bonuses, and flexibility and innovation. Given the difficulties many growers have faced in recent months with aphids, we are particularly pleased to offer our new Virus Yellows assurance in the contracts, to help support growers through the challenges of the disease.

“Growers will also continue to see investment in the future of the sugar industry, through science-led advice and guidance from the BBRO, innovation in seed technology, and industry-wide advocacy for plant protection products and future breeding techniques.”

The 2021 price list for sugar beet seed, as agreed by the joint British Sugar and NFU Sugar Seed Working Group, will be communicated in the coming days. Improvements in seed indicate yield potential will be up by approximately 5% on average and prices have reduced this year, providing an average saving of c.5% on seed costs for growers.

• The three-year contract continues to pay a £0.88/t premium to growers who commit for the longer term.
• A new bonus mechanism translating the EU reference price into a UK beet price bonus (agreed last year) will come into effect, in anticipation of the UK no longer feeding into the EU reference price.
• These prices are on a no-crown tare deduction basis, meaning growers are paid for the entire root of beet they deliver. Contracts for 2021 onwards will use a new sugar scale, which sees growers paid in direct proportion to the sugar content in their beet. In combination with the removal of crown tare, this means growers will be paid for, on average, 4% more adjusted tonnes of beet for the same crop.
• Under the new Virus Yellows fund, a grower’s losses will start to be compensated if they deliver less than 90% of their contracted tonnage (i.e. the first 10% of lost yield acts as an excess), provided they plant a sufficient area and meet certain conditions. British Sugar will pay 45% of the value of the shortfall (with the compensation payment at a 35% yield loss). Growers eligible for compensation will be automatically paid at the end of the campaign.
• The new futures-linked contract pilot will initially be open to up to 100 growers in its first year, who will have the option to allocate up to 10% of their tonnage onto this contract.
• Growers will receive full details in their contract packs in the coming days.
• The 2021 beet contracting and seed ordering windows will open on the 10th September 2020, with growers who contract online able to return their contract offer and seed order on the new My British Sugar portal for the first time this year.