Sugar beets: Tereos’ cooperative growers benefit from good results
20 Apr 2018 --- To help support its cooperative growers in the post-quota era, Tereos was the first group in Europe to guarantee growers a minimum price for their sugar beets and implement measures to bolster the cash flow of their farming businesses.
This week, Tereos announced a final price for sugar beets of €28.40/t, 14 percent higher than the price announced when contracts were signed.
70 percent of cooperative growers have opted for, and have already received, complete reimbursement of their excess cooperative shares. In the difficult economic climate currently being faced by French farmers, these extra funds, in addition to the price paid for the beets, will help to shore up the cash flow of their farms.
The estimated average price of €28.40/t incorporates the basic price, premiums paid as part of the 2017/2018 campaign, interest on shares and the payment of dividends.
Also, Tereos told its cooperative growers it would automatically reimburse excess cooperative shares unless they made a specific request. This offer has been widely taken up, with 70 percent of the cooperative growers concerned opting for and receiving full reimbursement of their excess cooperative shares, helping to sustain their cash flows.
At the General Meeting to be held in June 2018, the Supervisory Council will propose the payment of a special dividend of €0.86/t of beets. This dividend follows an initial dividend of €0.84/t paid in February 2018. In total, dividends paid in 2018 will total €1.70/t of contracted beets. This substantial additional revenue proves that the diversification strategy implemented by the group for more than 15 years is solid and that it makes economic sense for Tereos’ cooperative growers.
Concerning surplus sugar beets delivered beyond contracted beets, Tereos applies a principle of compensation, partially paying for these beets at the price of contracted beets. For the past campaign, approximately 500,000 tons of excess sugar beets, equivalent to more than 25 percent of their total volume, were paid at the price of contracted beets.
Taking account of the advance paid on March 31 on surplus beets after compensation, this amounts to having paid €15.50/t for all surplus beets.
The contract model offered by Tereos to its cooperative growers in the context of the ending of quotas and the abolition of a minimum price in Europe proved extremely successful, resulting in a 25 percent increase in contracted volumes by a minimum price of €25/t.
For the 2018 campaign, still part of a two-year price guarantee, cooperative growers will again benefit from a guaranteed minimum price of €25/t, reflecting Tereos’ desire to protect the revenue of its cooperative growers from the effects of high price volatility during the first two years of market liberalization.
rench-headquartered cooperative group Tereos is undergoing some significant transformational changes. In the first months of 2018 the merging of the sugar beet, potato starch and alfalfa cooperatives into a single entity was unanimously approved. This new organization is the culmination of a process of harmonization carried out over fifteen years, which ensures that all cooperative growers enjoy the same conditions, particularly with regard to prices, operational regulations and the payment of dividends and indemnities, so enabling them to create long-term value from their production. It comes amid dynamic shifts on the market, including the ending of the EU Sugar Regime, which presents sugar and isoglucose suppliers with increased export opportunities.
“The big challenge for us, but also the big opportunity, was to go from being a net import position in Europe to having an export situation,” says Eric Villain, Marketing & Sales Excellence Director at Tereos. “We are talking about moving huge volumes from Europe to outside and you need networks to achieve that.” For Tereos, participating with these export opportunities is key. “For us, this really goes with our value proposition, which is to be able to meet the demands of our customers not only in Europe, but more widely speaking. Basically, it requires having global supply reliability. Either in Brazil or Europe, these are large producing areas and to the export world, targeting many geographies. It is about helping our customers to grow internationally,” he notes.
A detailed interview with Villain will appear in the April/May issue of The World of Food Ingredients.
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