The trade in member delivery notes (LLBs) of the Royal Cosun cooperative is lively. Beet growers show continued interest in possibilities to expand or trade their beet acreage. Where does that popularity come from?
The trading of LLBs roughly takes place in the period from November to March. Especially around Christmas, traders have seen an uptick in the supply and demand situation. Meanwhile, it is mid-March and trading has calmed down. As soon as the sowing begins, the trade also comes to a standstill, is the general opinion.
safe bet
Despite the fact that it is not possible to write off LLBs, as was the case with the quota, it remains attractive for growers to purchase them. The value of €5,50 (which Cosun gives it) is not a sales price, but an investment that is deducted from the beet money over a period of 5 years. If you stop growing, you get that investment back. Expanding into LLBs is therefore a safe bet.
Cosun members have confidence in their cooperative. The rising beet price of last year confirms this. Cosun is well equipped against the turbulent waters in which the international sugar market finds itself. The members' bonus of €14,75 per tonne, of which about €5 comes from subsidiaries, acts as a buffer for a profitable beet crop. A buffer that commercial European sugar processors lack.
Low Efficiency Alternative
In addition to trust, a lack of alternatives is also a major driver. Especially at low potato, onion and carrot prices, beets offer an attractive and extensive alternative. Looking at the whole of Europe, it is mainly the low grain prices that support the beet. If you want to grow, you have to dig deep into your pockets, which does not hinder the market. All parties that Boerenbusiness agreed that demand exceeds supply.
Traders report that market prices are currently between $40 and $50 per LLB. One tends to $45, while the other counts with $50; in all cases considerably more than the €5,50 that Cosun spends them for. Around Christmas, the price briefly rose to a high of €55 per LLB. Above €50 it becomes difficult to find buyers.
Area shift
There are a number of reasons for the released supply. To start with, some Cosun members have purchased more LLBs in the past than they can fit on their company. This with the idea of trading it freely. Growers deliberately sow a little more sharply due to increasing yields per hectare. The number of LLBs then no longer 'matches' with the building plan, with the surplus being traded or rented out.
In Flevoland, there is some supply, because companies are going to grow organically. LLBs from Flevoland fall in regions 5 and 6, which means that they can be deployed nationally. The general view is that arable farmers in the northeast and southeast of the Netherlands are most eager to buy. Gert Sikken, agricultural director of Suiker Unie, agrees. The companies in these 2 regions get along well with LLBs from Flevoland.
Companies that act as intermediaries only see the national shifts. Most LLBs are traded between neighbors or nearby growers (excluding intra-partnership transfers). Creative rental and lease constructions are sometimes used for those who do not want to relinquish the delivery rights. A gray area that Suiker Unie turns a blind eye to. The rule remains that the owner of the LLBs is liable for delivery. Earlier we wrote about the new policy about 'beet tourism'.
Equal area
For 2018 aims Cosun on the same acreage compared to last season: about 85.000 hectares. The allocation per LLB has been reduced from 112% to 107%. "This concerns fine tuning", says Sikken. "The allocation is intended as an instrument for this. An allocation of 112% was on the high side. Last summer 8% extra LLBs were already issued. We therefore expect a net area to remain the same."