Avoiding the mostcommon problemsassociated withoilseed salescontracts

Produced by AHDB Cereals & Oilseeds, on behalf of the Cereals Liaison Group

1. Before agreeing acontract

� Grow for a market� Check assurance

scheme requirements� Manage price

volatility

2. Agreeing the contract� Check the price offered or

calculation method� Understand the adjustments scale� Discuss possible destinations for

the crop� Consider asking for special clauses� Exchange contact numbers� Ensure you receive the written

confirmation promptly

3. Delivering thecontract

� Keep a representativesample of each load

� Check lorries forcleanliness

� Get a receipt for everyload despatched

Oilseed Sellers’ Checklist

Grow for a market.There are a number of different types of oilseed rape,including double low, high oleic/low linolenic (HOLL) andhigh erucic acid rape (HEAR), and a range of food and non-food markets. The contract type may affect the value,movement requirements and delivery destination.

If growing for a fuel or energy market, ensure the crop andland on which it has been grown meet the requirements ofthe Renewable Energy Directive (RED) SustainabilityCriteria, often covered by UK farm assurance standards.

Moisture, admixture and oil content are the keycomponents of contractual requirements. The FOSFA 26acontract specification is clear and unequivocal: providedthe seed falls within the contractual specifications ondelivery, it will be accepted without reference to the seller.

The crop must have been produced from a variety whichwas registered with a glucosinolate level of 18 mol(micromoles) or lower. The crushers require that the crop isgrown from certified seeds or, for open-pollinated varieties,from first generation farm-saved seed. Hybrid varieties areexcluded from the farm-saved seed exemption under plantvariety rights legislation. BSPB publishes an annuallyupdated list of varieties meeting the glucosinolatespecification at www.bspb.co.uk/news.php

1. Before agreeing the contract

Check assurance scheme requirements.Crop assurance is now required on the vast majority of cropsales. As such, it is important to remain aware of thestandards as they evolve.

Manage price volatility.Combinable crop markets remain volatile, so it is importantto have flexible marketing plans in place and to develop along-term business strategy to manage the impacts. Thereis no 'one size fits all' approach to crop marketing, so it isimportant to weigh up all the options, for example,averaging, pools, target/stop-loss prices and minimum pricecontracts. Longer term, ensuring that the business is cost-competitive and resilient, for example, building cashreserves in the good times, is key to surviving volatility.

Avoid cross-contamination.If you are growing different types of oilseed, the identity ofeach type must be preserved and any mixing or cross-contamination avoided. ‘Volunteer’ plants can persist formany years. Each type has a different end use and requirespure rapeseed of the contracted type. Testing for cross-contamination takes place after delivery and processing, soif a problem is identified it is likely that a considerabletonnage may have been affected, with significant costs.

2. Agreeing the contract

A contract is made when both parties agree to atransaction.

It is essential to establish all terms before finalising thedeal. Any term can be negotiated but be aware thatintroducing more demanding terms may transfer risk,affecting the price.

Check the contract basics.– What contract is to be used?– Are there any special terms or conditions in addition tothe base contract? Are you willing to accept them?

– Are all the terms clearly stated?

Certainty is essential; do not be left in doubt.

Decide on a market tonnage or area contract.Some contracts are available for a given crop area ratherthan risking a commitment to a fixed quantity. In thiscase, the field OS number(s) should be specified,otherwise a seller will be contractually liable to aminimum tonnage even if the crop fails or the quantity isgreatly reduced.

Check the price offered or calculation method.– When will you be paid?– Can you negotiate pre-payment or early payment?– What are the penalties for sub-standard delivery?– Are there any special terms and conditions proposed bythe buyer?

All items applying to the price of a contract arenegotiable. If you feel strongly about them, you shouldask for changes to the contract terms.

The FOSFA 26a Contract sets out the rights andobligations of buyers and sellers. Buyers are obliged tomake available the terms and conditions on which thecontract is made. Additionally, NFU and NFUSmembers can view the FOSFA 26a Contract atwww.nfuonline or www.nfus.org.uk

Discuss the possible destinations for yourcrop before making the deal.A seller may seek to exclude a specific delivery point orto limit the radial distance to which their goods aredelivered but such provisions can lead to a lowercontract price. As a seller, you need to be aware of anyseparate final receiver’s terms. Discuss this issue indetail or obtain a copy of them before you sell.

Understand the adjustments scale.An ‘adjustments’ scale for oil content, moisture contentand admixture is included in the contract. The sellershould know the details of that scale, which should bein the confirmation. Full details are available in theFOSFA 26a contract. Contract terms state a maximumof 2% free fatty acids (FFA). Any adjustments will be bymutual agreement.

Consider asking for special clauses to beinserted to suit your own situation andhave them stated in the confirmation note.The negotiation phase is more important than simplyagreeing price, quality and delivery period. Everygrower should consider their situation and ask forspecific requirements to be considered in ‘specialclauses’ in the contract (eg no weekend collections, orany access restrictions).

Ensure that you and your buyer have allpossible contact numbers.Nominate a specific person to deal with problems inyour absence.

Ensure you receive the writtenconfirmation promptly.Check that all of the terms (price, quality, variety,quantity, delivery period, payment terms and anyspecial conditions) are as agreed. If they are not, tellthe buyer immediately, otherwise your silence will betaken as acceptance. Obtain an amended confirmationbefore parting with any goods.

S

t

t

t

C

–

–

f

3. Delivering the contract

Double-check the load.If you grow different types of oilseed (eg conventional,HEAR and/or HOLL), ensure the correct material isbeing loaded. Cross-contamination can incur significantcosts.

Keep a sealed, representative sample ofeach load taken.Label samples with vehicle details (registration andtrailer number), farm name, store and binname/number, date and time, and variety.

Store samples in airtightcontainers in a cool, dryplace safe from rodentattack.

Retain the appropriatesamples until paymenthas been received for theload.

These samples will notbe contractual for thepurposes of thedetermination of quality or condition at the deliverypoint but they may help if problems arise.

Check lorries for cleanliness prior tosigning the passport.Ensure contaminants, such as clay and bituminousproducts aren’t accidentally loaded with the seed – forexample, by scooping up fragments of tar with thegrain bucket.

Get a receipt for every load you despatch.The receipt should show the nature of the goodsloaded, the approximate weight, the vehicle registrationand trailer number, the name of the haulage company,the date and time, and the contract number. In addition,the driver should print their name clearly and sign.

See: Grain samplingguide (AHDB Cereals& Oilseeds)

Practical pointsDryingDriers should be well maintained. Operating driers poorlymay lead to hydrocarbon contamination of the seed andresultant quality claims. Over-drying can result in anincrease in free fatty acid content. The lowest acceptablemoisture content for prolonged storage is 6% and theideal is 7.5–8%.

StorageDo not store oilseeds on floors treated with bitumen, asthis may lead to hydrocarbon contamination.

Clean and disinfect the store between harvests to reducethe likelihood of mites or mould in stored goods. The useof actellic dressing on stored oilseeds is NOT permitted.Inert diatomaceous earth may be used to treat mites butthis material can pose a problem to crushing machinery,so check with the buyer before using it.

Clay pigeonsClay pigeons contain pitch, which can cause serioushydrocarbon contamination of rapeseed crops.– Do not store clay pigeons in a grain store or transportthem within a trailer or grain bucket used to carryrapeseed

– Do not shoot clay pigeons over a standing oilseed rapecrop past its yellow bud stage or after 31 March,whichever is later

If you suspect your crop has been contaminated, you arestrongly advised to have it analysed before it leaves yourfarm.

Green seedsCrushers may reject seed lots that contain more than 4%immature (green) seed. To check, crush the seed andexamine the cotyledons inside, which should be yellow.Seed coat colour is not a reliable indicator.

S

Claims and rejectionsIf a claim/rejection arises, the seller may dispute thefirst analysis results and claim the right to request aretest within two months of the delivery date. Thecost of the independent analysis is to be borne bythe buyer, provided that the retest result varies fromthe original by more than 0.8% in oil or moisturecontent and 0.4% in admixture. If the retest resultvaries by this figure or less, the cost is to be borneby the party requesting the analysis. Regardless ofwho pays, the retest result is final and is what youare ultimately paid on. Obtaining the results of theretest can take a considerable time and they arebinding on both parties.

Summer 2016While the Agriculture and Horticulture Development Boardseeks to ensure that the information contained within thisdocument is accurate at the time of printing, no warranty isgiven in respect thereof and, to the maximum extent permittedby law, the Agriculture and Horticulture Development Boardaccepts no liability for loss, damage or injury howsoevercaused (including that caused by negligence) or suffereddirectly or indirectly in relation to information and opinionscontained in or omitted from this document.

© Agriculture and Horticulture Development Board 2016.All rights reserved.