Sugar prices could see further falls

28 MAY 2015

Depressed global sugar markets could prompt industry exits.

There could be further exits from beet production in the coming year if more cuts to British Sugar’s contract price emerge, experts have warned.

Contract negotiations between British Sugar and the NFU on this year’s beet crop, announced last July, saw growers receive a 24 per cent price reduction to £24/tonne and there was a 20 per cent reduction in tonnage as British Sugar attempted to cut down on surplus production.

And with global sugar markets remaining depressed, some commentators believe there is likely to be further cuts for the year ahead, which could result in a continued shrinking of the UK sugar sector.

Agricultural consultant and former director at the British Beet Research Organisation (BBRO), Robin Limb, said global market factors meant sugar processing margins were almost non-existent.

“I think it is likely there will be further reduction [in price] this year, despite last year’s big fall. The margins on beet processing are pretty much non-existent,” he said.

But Mr Limb said prices were unlikely to drop below £20/t as this would be seen as a physchological price barrier for many producers which could spark a large-scale exit from contract beet production.

Sugar prices for the following year are usually agreed in July and the NFU, acting on behalf of members, negotiates a beet contract price with British Sugar.

Spokesmen from both the NFU and British Sugar said negotiations were continuing and declined to comment on price prospects.

“At £20/t there reaches a tipping point,” said Mr Limb. “Combinable crops are simpler and less risky, so people would possibly look for the simpler option.

“Sugar beet was always seen as an option which could get people through years when combinable crop prices were low. At the moment there needs to be consideration of a lower price by everyone.”

Article written by Joel Durkin and sourced from FGinsight.com