Sharing the risk with growers

From the 2019 Annual Report

AB Sugar continues to work with sugar beet growers in Spain and China to ensure that sugar remains a sustainable crop for them and us.

We have a long history of partnering with our growers to transform the sugar beet industry. In Spain we have assisted growers with contracted services, with crop agronomy expertise and with flexible payment schemes. This has enabled them to improve productivity and made sugar beet a more attractive crop. And in China our service-based partnership with growers has led to a rise in mechanised land from 2% to 78% over ten years and has doubled sugar beet volume.

Sharing risk and reward

In Spain and China, as sugar prices have fallen, the prices we have paid to growers for sugar beet have become unsustainable. Therefore, this year we took the difficult decision to renegotiate our contracts with growers in both markets.

In Spain, Azucarera has reduced beet prices for the 2019/20 campaign by 20%, after ending the previous five-year contract 12 months early. In negotiating the new arrangements, we held face-to-face talks with 85% of growers, their unions, all key regional and national agriculture ministers and officials to explain the change. We believe the more realistic terms will provide a sustainable platform for our growers and ourselves. We are engaging with our newly contracted Spanish growers however, unfortunately, others have chosen not to supply beet to us for the 2019/20 campaign.

In China, poor weather conditions in this year’s campaign impacted the quality of beet, reducing the level of sugar that could be extracted. We are therefore phasing in a quality control system, in line with that used in our other countries, whereby payments to growers will reflect the sugar content of beet provided. A third of our growers will come under the new system this year. To facilitate the change, we have invested £1 million in quality testing equipment at our two Chinese factories. Additionally, the headline beet price has been reduced by 10%.

Mutual benefits

Our track record of working in partnership with our growers has benefited us all. We believe that sharing the risk now will again deliver mutual benefits, as it will allow both us and our growers to remain competitive and successful over the long term and build on what we have achieved together so far.