British Sugar is set to increase its sugar price to industry by 4% next year, but the company insisted that it was not asking manufacturers to foot the bill for an over-generous deal with UK farmers.
It refuted a suggestion by the Biscuit, Cake, Chocolate and Confectionery Association (BCCCA) that manufacturers would be expected to pay for an agreement in which beet growers would still be getting more than the EU minimum for their crop three years after reform of the sugar regime, which was supposed to bring prices down.
Under a deal with the National Farmers' Union, British Sugar will pay farmers progressively less between now and 2009, when the price will fall to £19/t; £1.50/t above the EU minimum.
"We have to pay the price to farmers to get them to grow it," insisted British Sugar Europe's commercial director, Richard Rankin. "At 4% we are definitely not passing on 100% of the cost increases we have in the business." He said 4% was in line with increases on the Continent.
The BCCCA's trade policy director Cliff Luckhoo said: "In the third year of the deal, they are actually being very generous. Of course, it's up to the sugar companies what they pay their suppliers, but what we're saying is don't pass it on to manufacturers."
Rankin said: "I'm genuinely surprised by the BCCCA linking price rises to the price we pay farmers." He said that, under sugar reform, prices would be determined over the next few years by supplies from overseas. He said the whole sugar sector also faced higher costs, related to issues such as production quotas, export restrictions and higher energy costs, but he expected falls of about 15% by 2009/10.