Contract comparison
The 2025/26 beet contract agreed between NFU Sugar and British Sugar requires growers to place at least 30% of their 2025 contract tonnage on one or both of the market related contract options.
The maximum proportion of contract tonnage that can be put on the £33/t fixed price contract is 70%, but it is possible to put a smaller proportion on the fixed price contract and more than 30% across the other choices.
The two options for market exposure work in different ways. The MLB (market-linked bonus) offers a fixed minimum price but more limited potential for upside, and will result in the same beet value for all growers on the contract depending on British Sugar’s sugar sales.
The FL (futures-linked) contract is much more sensitive to market movements in both directions, offering the potential for greater upside but also unlimited downside. It empowers the grower to make individual pricing decisions without any fixed minimum price up until the beet is priced out.
The British Sugar contract pack and information should provide more detail about how each option works, but it is important to also understand the impact of market movements on each contract.
Although both models expose the beet price to the sugar market, they are not linked to exactly the same market. The MLB relates to the UK/EU sugar market as it references the price of sugar achieved by British Sugar for the sugar produced from the 2025 crop, whereas the FL contract relates to the forward price of sugar on the world market, which will influence but not be identical to the UK/EU sugar market price.
As a guideline, Globaldata’s latest European sugar market report assesses European sugar prices as being contracted around €480-€525/t for 2024/25, depending on location and size of buyer, whereas earlier in the summer sale prices were being assessed around €570/t – more or less equal to the trigger level on the 2025 MLB contract.
It is 2025/26 prices that will determine the value of the 2025 beet contracts, but this provides an indication of the starting point for the market given current conditions.
Sensitivity of each option to price movements
The FL contract is much more sensitive to market movements than the MLB contract. For example, if there were a €100/t rise in the world market and if this meant the price achieved by British Sugar in UK/EU market were €100/t above the trigger point, the FL contract would rise by £16.70/t (see figure 1) whereas the market-linked bonus would only amount to £4.20/t.
However, if the price were to fall by €100/t from where it currently is, the downside on the MLB contract would be capped at the minimum price of £30.70/t whereas the price FL contract would drop by £16.70/t. For comparison, at the time of writing, the 2024 FL contract is trading about £13/t lower than where it started, whereas the 2023 contract had reach over £20/t above its starting point by the time the pricing window closed.
Bear in mind, the actual price achieved by growers on the FL contract will depend on when pricing decisions were made – although the market will continue to display a price through to the end of August 2025, beet can priced out at any time before that once pricing is open.
Price movements required to reach £33/t.
There is no guarantee either of the market related contracts will reach £33/t, but likewise it is possible both could exceed this price.
The MLB contract would require the audited 25/26 white sugar value to average at least €635/t to deliver a beet price above £33/t, as shown in figure 2.
The UK/EU sugar price can be driven by both underlying world market movements and the supply demand balance in Europe, as this influences the scale of any premium over the world market and can change from year to year.
The world sugar market would need to rise only c.€15/t from wherever it starts on day one to result in a beet price of £33/t being possible on the FL contract (at current exchange rates).
However, the price on this contract will not be affected by any change in the UK/EU premium over and above any underlying world market movement.
A trader’s view
NFU Sugar Board appointee and sugar trader Paul Harper shares his thoughts on the current market situation.
NFU Sugar Board appointee Paul Harper
Paul has spent his entire career in commodities and has been in sugar since 1976. He joined C Czarnikow in 1973 working in their London, New York and Singapore offices. Paul has a huge amount of consultancy experience, having consulted for a hedge fund, major bank and a large trade house in sugar during that time.
It has been a while since our last review and the market in that time has taken on a different stance. Estimates of the global surplus for 2025 onwards continue to grow as weather has not appeared to have disrupted production so far.
Speculators, looking for the next move, appear to have decided that it will be down and currently sit around 65,000 lots short of the New York No.11 raw sugar futures market, whilst maintaining a small long position in the white sugar No.5 futures market.
Having spent time in a long-term bull market it would seem the market is trying to establish a fair value again for a market that is now in surplus.
Having traded below 18c/lb in New York a couple of times, there was enough demand in the market at this price to stave off further selling by speculators.
Upward moves towards 20c/lb resulted in producers hedging. These have thereby created a trading range that has existed for the last couple of months.
It is interesting to note that despite the more bearish stance in the market, when looking at forward prices for March 2025 onwards, those further away are below those closer by. The very far forward prices into 2026 show little encouragement for production expansion being more than $20/t lower than forward prices for 2025 at the time of writing.
Time will tell just how much of a surplus will exist and how this will affect the global trade. Brazil is still the main supplier and while crop conditions remain relatively stable, it is clear that they are unlikely to match last year’s exports. Just how much sugar is produced will depend on how the crop fares towards the end. India is unlikely to export any sugar at the current market level although is a potential seller should the market make significant gains.
We could see the market continue to trade in the recent range for a while unless anything changes. With the European crop under way and Brazil moving into the second half of their crop year, any unexpected numbers will likely dictate the next move.