UK Group Develops Grain Sales Contract

LONDON - May 21/02 - SNS -- For a producer organization, the National Farmers Union in the United Kingdom has taken a radical step in the business relationship between agricultural producers and their buyers.

It has recognized there is a business relationship between buyers and sellers and designed a contract for use by grain producers in the United Kingdom when selling to primary elevators, seed processing plants or feed mills.

This is an important first step for an industry where primary producers have a surprising willingness to finance the operations of their buyers. But without demanding more beneficial contract terms in exchange. For instance, some companies stretch out payment periods without paying interest on the money borrowed by the grower.

Even so, the organization is under no illusion that the contract will be eagerly adopted by grain buyers or by sellers.

The contract developed by the NFU specifically covers cereal grains in the UK, but could be used as a model by individual producers and producer groups elsewhere in the world.

A copy of the contract can be downloaded here: http://www.nfu.co.uk/info/cerealscont.pdf.

As is the case in most parts of the world, producers in England have traditionally accepted the purchase terms and contract written by the company instead of negotiating any amendments to the contracts they feel are necessary.

The contract developed in the UK as part of the NFU's Arable Action campaign seeks to better balance the interests of cereal grain sellers and purchasers. It is a direct response to farmers' concerns that have built up over many years about the terms and conditions currently on offer on the sale of grain in the UK.

Speaking at the launch, NFU Cereal Chairman Richard Butler said: "For a long time UK cereal growers have been in a weaker contractual position. This has, at times, prevented them from reaping the full value of high quality grain, as well as receiving sufficient justification for rejected loads.

"By adopting this contract growers can put themselves on a fairer footing with grain buyers. Not only does it give greater feedback to sellers, but it also builds in a number of options that will allow cereal quality to be better reflected in the value of the contract."

The most interesting terms of the proposed contract cover pre-harvest selling by growers.

Explaining these clauses, the NFU said, "Where the contract relates to the pre harvest sale of malting barley, milling wheat or milling oats, the parties are required to agree in writing, under special terms,the procedure that will be followed if the cereals are not suitable for their intended market, including a clear statement as to whether the default clause, potentially requiring a seller to meet the cost of fulfilling the contract from other sources, is to apply.

"The contract also allows the parties to defer agreeing the rejection points and premia and deductions to apply under the contract, until harvest is being completed and the appropriate values for the quality characteristics of the national crop established in the market.

"The NFU will be seeking the co-operation of the trade associations and commercial companies involved in the grain trade to provide a table of suitable indicator values for these quality parameters at the start of each season, having regard for the quality of the national crop and the state of balance in the market."

Among other conditions, the contract includes:

* a range of tolerances on grain testing within which no deductions will be made

* written confirmation of grain weight and quality analysis results must be provided to the seller

* the buyer must meet the cost of weighbridge charges

* set procedures to improve justification for rejection

* provision can be made for the seller to receive a premium when grain is above the quality required in the contract

* providing the seller with the opportunity to specify the point of intake for cereals

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