Boortmalt agrees to ‘top up’ seed growers' contracts

Boortmalt have agreed to top-up seed growers contracts in an effort to make up the shortfall in payments resulting from its new seed pricing model.

Under the new pricing structure, growers will be paid a premium over the green harvest price for feed grain.

Previously, growers who produced malting seed barley for Boortmalt received a premium over the malting barley price.

In 2018, for example, growers were paid €17/t over the price of malting barley for their seed crop.

April meeting

The Irish Farmers Journal attended a meeting of malting barley seed growers in April, where the 40-strong growers' base decided to reject the new model.

Following talks between the IFA malting barley committee and Boortmalt, the maltster agreed to make up the shortfall in the event that growers' payments under the new model would fall short when compared with those of the old model.

New model

Under the new pricing model, growers will receive a premium over the price of feed barley (Glanbia green barley inclusive of bonuses).

The seed premium is calculated using a percentage of the reference price for basic white label seed.

For example, in Table 1 below, the reference price for basic white label Planet seed is €770/t.

The premium per tonne for the first 2.6t of a 3t/ac seed contract is 4.5% of this reference price. In Table 1, this equates to €34.65/t or €90.09 for 2.6t.

The balance of the contract, ie the remaining 0.4t/ac, is calculated at 2.25% of €770/t.

This equates to €6.93t/ac (2.25% of €770/ac = €17.33/t x 0.4t/ac). This is assuming this remaining 0.4t/ac passes for seed.

This equates to a total premium €97.02 per three-tonne contract or €32.34/t.

A haulage payment of €6.16 is included, bringing the total premium per tonne to €38.5.

Seed price comparison

When comparing the new seed pricing model to the old one over the past four years, we see that the smaller the price gap between the feed and malting barley price, the more beneficial the new model will be for growers.

For example, in 2015, the difference between feed and malting price amounted to just €9.50/t.

In this case, under the new model, growers would have had an increase in premium of €12/t when compared with the old model.

However, fast forwarding to 2018 where the difference between feed and malt was €24.7/t, we see that growers' premiums would have been reduced by €3.3/t.

2019 price

While green harvest feed and malting barley prices are yet to be announced, we can take a look at how the new model performs using projected prices.

Taking a green feed price of €145/t and a malting barley price under the new Fob Creil averaging model of €175/t, we see that growers' premiums stand to be reduced by €8.5/t under the new model in comparison with the old one.

Boortmalt has agreed to top up premiums to make up this difference for 2019.

However, the new model will be in place for 2020 onwards.

The 2019 top-up is not believed to be in place for 2020.

Reaction

The IFA has welcomed the move by Boortmalt to top up contracts and the acknowledgement of the effort seed growers go through to produce this crop.

“Irish cereal seed is grown to the highest standards when compared to other countries within the EU and it is important that this is recognised,” IFA grain committee chair Mark Browne has stated.

“We are now calling on all seed assemblers to increase the premiums paid to growers and improve the transparency of pricing models in line with Boortmalt,” he stated.

“Seed growers must pay a higher cost for white label seed, incur increased costs when producing it to higher standards, all with the uncertainty of whether it passes for seed or not.”

With the land suitable for producing seed in decline, growers need an adequate incentive to continue to grow the crop, he concluded.

The IFA has previously met with members of the Irish Seed Trade Association and have further talks planned.

It is believed that seed contract premiums provided by other assemblers range from €20/t to €30/t over feed.

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