A further reduction in UK sugar output is likely before the sugar beet crop area returns to more normal levels, says British Sugar.

The processing giant’s parent company ABF made the forecast in an interim statement to investors ahead of its end of year results which are due in November.

As planned, UK sugar production was just short of 1m tonnes for the 2015-16 year, it said.

See also: Outlook 2016: Sugar beet to break even at best

This was in order to reduce excessive stocks from the prior year, with a smaller contracted growing area and average beet yields.

Regarding the current crop for the 2016-17, above average rainfall in June had slowed the growth of sugar beet due to be harvested this autumn and winter, said ABF.

“Combined with a further small reduction in the contracted area, we expect a further reduction in sugar production next year before beet supplies are restored to more normal levels in 2017-18.”

New contracts

British Sugar’s Silver Spoon brand gained new contracts and benefited from a relaunch this summer, although low retail sugar prices maintained the pressure on its margins, said ABF.

But an ongoing post-Brexit weakening in the value of sterling would have a “favourable transactional effect” on British Sugar’s overall margins.

Underlying revenue and adjusted operating profit for AB Sugar for the full year – at both actual and constant currency – would be ahead of last year.

But with most of British Sugar’s contracts agreed on an annual basis, there would be no material impact on its results from the improvement in pricing until the firm’s next financial year.