British Sugar will take the unusual step of paying farmers a premium to harvest some beets early for next season, signaling there are worries supply will remain tight later this year.
(Bloomberg) — British Sugar will take the unusual step of paying farmers a premium to harvest some beets early for next season, signaling there are worries supply will remain tight later this year.
The deal agreed in March is the latest move by Britain’s only beet processor to tackle shortages after last year’s drought and then winter frost hurt the volume and quality of crops across Europe. Encouraging growers to harvest weeks earlier than normal may ease supply tightness before the campaign officially starts in October.
Under a one-off contract, farmers will collect crops in early September for £3,000 per hectare ($1,520 per acre) regardless of yield, according to Arthur Marshall, a commercial analyst at the National Farmers Union, which negotiates on behalf of growers. That’s on top of a previously agreed deal for higher beet prices aimed at spurring more plantings.
The measure highlights industry concerns about shortfalls — both in Britain and abroad — that have sent sugar prices soaring and contributed to food inflation. For example, the rally helped push up chocolate, sweet and fizzy drink costs sharply in UK stores recently. European white-sugar prices have hit the highest since at least 2006.
Sugar Is Getting Even Pricier, Threatening More Food Inflation
British Sugar, owned by Associated British Foods Plc, didn’t comment on the premium to be paid for early harvesting. It will cover only a small part of the UK crop, according to the NFU’s Marshall.
“The contract is for a bit of extra area where growers committed to deliver those beets at the start of September, which is earlier than usual,” Marshall said. It’s still too early to predict yields, he said, adding that rain has already delayed sowing for next season.
AB Foods earlier this year cut its estimate for UK sugar output in the current season by roughly 18% to 0.74 million tons because of unfavorable weather. Lower production in Europe has also restricted the amount of sugar available for exporting to Britain.
The UK relies on imports from places like the European Union and African, Caribbean and Pacific countries to meet demand. British Sugar has said it is buying imported supplies from a number of sources to meet long-term contracts, without elaborating.
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