Sugar Beet: Variable or Fixed Price Contracts?

1st August 2022

For most of my life sugar beet have represented a stable but unexciting crop. Sugar adjusted yields have seemed reasonably consistent from year to year and the price for which the commodity could be sold has been negotiated by the NFU and British Sugar before growing contracts have been agreed. I have just listened to a joint presentation by the NFU, British Sugar and their pricing partner, Czarnikow, about futures linked contracts. The 2023/24 beet contract offer includes an option to put up to 20% onto a variable priced contract linked to sugar futures. This potentially is the start of a new era.

 

I cannot pretend to understand the drivers which determine the market price of sugar beet, which Czarnikow will be updating on their app for those who elect for variable price contracts, every 15 minutes. My immediate thought is that the availability of a fixed price perceived to be significantly above cost of production will discourage many from the commitment of following market prices. Conversely if for a season the fixed price was to drop, some may be prepared to gamble on growing on variable price contracts and trusting to a recovery in the market to protect their margins.

 

There is much to be learned about this new offering.

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