The German starch producer Emsland Group is breaking open agreements for the delivery of potatoes for this harvest. The producer has announced this to the growers. The lower revenues are compensated by means of a higher payout price per tonne. A two-step plan has been presented for this. The penalty clause expires.
Emsland Group is increasing prices for starch potatoes (2018 harvest) by €25 per ton, a so-called drought premium. This price applies on top of the estimated average base price of €80 per tonne, bringing the total to €105 per tonne. The additional price applies to all delivered tons that meet the company's quality requirements.
The €80 is based on an estimate, with an average amount of starch and tare. Emsland benchmarks their price against the global starch market and the efficiency of the factories. Given the higher wheat price, this price is seen as a floor. The actual payout price is probably higher.
If the basis of the right of delivery cannot be fully delivered, this will have no consequences. This is because the penalty clause for this will be lifted. The standard delivery right offers 20% leeway, whereby a minimum of 90% and a maximum of 110% can be delivered.
Price scale
The second step is a premium that is applied to the above-average tons. Emsland Group builds up a graduated scale. If the delivered tonnes per hectare are above the factory average, it will pay out extra money on top of the aforementioned €25.
Anyone who can deliver the factory average of their delivery right (55% in the example) can count on the basic price plus €25. If you supply up to 70% of your allowance, you will receive an extra €25 per tonne. If you supply up to 85% full, the premium is €30 per tonne. At 100% full delivery this amounts to €35.
Please note: the premium only applies to tons that fall within the set percentage. Emsland Stärke uses the factory average as a basis. If it is 55%, then in a calculation example of 1.000 tons, 550 tons is the average. The 3 graduated scales above (up to 100%) are each good for 150 tons. However, if the factory average is 70%, then for a total delivery of 1.000 tons, this concerns 3 times 100 tons for which an additional premium is paid.
Loyalty
The processor does ask for loyalty from its member growers. All plots are known in advance to the factory. The grower is obliged to deliver all tons to Emsland. The company hopes to close a loophole with this measure; namely the sale of starch potatoes to the flake or chip industry.
An increase in prices makes this less interesting. If tons are sold freely, all premiums will immediately expire. Plots are not first inspected and sampled. In normal years this is the case when a grower suffers from drought damage.