Arable farmers who are shifting their crop plan are causing the trade in Cosun Beet Company's Member Delivery Certificates (LLBs) to break loose. Not only is there a supply in the market, there are also growers who want to expand their acreage. What regions and prices are we talking about?
The trade in LLBs has actually only just started, while the harvest is still in full swing. While one trader is already talking about relatively high supply and demand, a colleague elsewhere in the country is still remarkably quiet. Cosun Beet Company itself – which trades by far the most LLBs – also says that it is still early.
National differences
The difference in market perceptions also has an effect on market prices. The necessary batches of delivery notes have now been traded in the center and north of the Netherlands. It is much quieter in the south of our country. Perhaps arable farmers there are even more active in the country and are not yet immediately working on their construction plan.
Because that is the main reason given for offering LLBs. Arable farmers are thinking about the construction plan for 2021 and sugar beet cultivation sometimes no longer fits in there. Which crops will take their place? In most cases this concerns land rental for the cultivation of tulips or vegetables such as carrots and cabbage. Growers have little confidence in the beet balance for the coming years. Two difficult springs due to drought and the loss of the neonics seed coating make the first phase of the season challenging. This also applies to the summer with a noticeably higher disease burden, which costs sugar and therefore balance. Drought in spring and summer also costs yields. Looking at the sugar market, the expectation is that the payment price will remain relatively low. Especially now that Aviko's contribution is also noticeably lower.
Average price
What price are LLBs trading at? The price is determined by 2 factors: the region and the quantity. Recent transactions have been around a level of €31 to a maximum of €34 per LLB. That is average, although it is difficult to get a good idea of it. Cosun Beet Company ultimately facilitates the transfer and mediates extensively in the realization of the purchase and sale. The company only shares these figures internally with the beet agents. A few intermediaries noted that the company itself would be more active. However, agricultural director Gert Sikken says that this is not the case.
Now that a benchmark is missing, what is a fair market price? According to Sikken, this depends on what the buyer and seller want. Is a buyer seriously looking or is he scanning the market? Prices from last year show that the bandwidth was between €24 and €40 at its peak. The level mentioned is therefore average, as Cosun Beet Company also notes. However, the comment is made that the market is under pressure. While trading at the beginning of November was as high as €34, it is now as low as €30. LLBs with region code 7 or 8, which can be placed nationally, are the most popular and are logically priced higher. Region 6 is at the bottom. There is actually no trading for LLBs with region code 1 or 2.
Beet cultivation in Oldambt doubled
The fact that transactions have been concluded also means that there are active buyers. There is still a group of arable farmers who give beet cultivation a large place on their farm. The most famous region is Groningen, where the Oldambt predominates. Although cultivation here also has its problems - especially in the spring - growers have expanded. From data from Farmer&Bunder shows that the cultivation of sugar beets in this region has increased by 112% in 5 years. Buyers are also reporting from Zeeland.
In Flevoland a constant decline in the area was noticeable for years. This is due to the fact that cultivation does not always fit into an intensive cultivation plan, rental for seed potatoes or tulips is more profitable and because many companies have switched to organic cultivation. Intermediaries note that supply from Flevoland is currently very small. The number of 'switchers' is small after a major wave in recent years.
Rental: preferably not, but it does happen
In addition to selling LLBs, there are also growers who opt for a rental construction. This is a sensitive issue at Cosun Beet Company. "Rental is in principle impossible," says Sikken. "The cooperative's policy is that every member is also a beet grower. At the same time, we do not want to block the business development of our members. A lot is therefore possible in consultation." The fact is that rental does happen in practice. This way, growers can give space to their cultivation plan and it will be placed with third parties as contract cultivation. Often in regions that are open to this, such as the Oldambt but also Eastern Netherlands. It ensures that selling is no longer necessary and dampens the market. Insiders expect that a new revival will be noticeable in LLB trading towards the end of the year and in January.