Beet farmers look for better price to sweeten the pill

Here is a story that highlights the monospony power of a business when set against the determination of farmers to get a better price for their product. For some time sugar beet producers in the UK have been battling with British Sugar to reach an agreement for the contracted price for their beet harvest in 2009.

British Sugar is a subsidiary of the giant firm Associated British Foods and it has a monopoly in refining British-produced sugar beet. Over 5,000 farmers supply nearly 7 million tonnes of beet to British Sugar which is then refined to produce an annual output of nearly one million tonnes of sugar. They have offered a contract price just short of £27 per tonne but the farmers say that they need at least £30 per tonne to be viable given the rise in production and transportation costs.

A classic confrontation

Too low a price and beet farmers may either refuse to sign the contract (and leave British Sugar reliant on imported sugar beet for its refineries), too high a price creates an incentive for British Sugar to by-pass domestic suppliers and shift to imports in a big way. British Sugar’s bargaining position may have been strengthened by a fall in the market price of cereal which may cause some arable farmers to switch out of wheat and grain production and into sugar beet - a good example of products in competitive supply in the market.

For the sugar beet farmers, the short term need is to stick together in their negotiations with British Sugar. Collectively they have some degree of influence, but individual farmers going it alone have virtually no impact on the price they will get for their output.