The headline value of a new deal for straw negotiated between the IFA and Bord na Móna is €60/t ex store. The deal brings to a conclusion the original negotiations with Biotricity a few years ago.
Announcing the deal at a recent IFA meeting in Co Laois, Tom Shortt of the IFA said that the deal should help to put a floor in the straw market by providing demand for an additional 60,000t of straw and by providing an index-linked 15-year deal in the process.
The deal revolves around a €100m investment to build a new electricity generation plant on a greenfield site in Rhode, Co Offaly. This will use straw to generate electricity and use the residual heat to dry timber that will be brought on to the site. There is also a plan to pelletise the ash and move it back on to farms as a source of fertiliser.
The price of €60/t is based on a challenging 14% moisture content. However, moisture contents from 8% to 20% are acceptable but subject to a 50c price adjustment per point above and below 14% moisture. The deal requires that straw be baled and moved into store post harvest and the price is then a loaded ex-store price. The growers must pay for baling, transport to their sheds and loading on to the dellivery trucks.
While the deal is with Bord na Móna, it is understood that the new entity in Rhode will be called New Leaf. The company will pay for the transport from the farm to the plant in Rhode but the farmer must load the truck.
Against this background Tom suggested that the €60/t price equates roughly to €30/t for the straw and €30/t for baling, delivery to store, storage, etc. As a general rule, most cereal crops will grow roughly the same amount of straw as grain so a 4.5t/ac crop of winter wheat will grow just under 4.5t/ac of straw. But only about 50% of the straw is harvested due to leaf loss, chaff or awns and the remaining stubble. And of these the height of the stubble can be the biggest variable.
These numbers equate roughly to what happens in practice. At 50% recovery, a 4.5t/ac of winter wheat straw would take off 2.25t of straw which equates to 4.5 big bales (8x4x4) at approximately 500kg/bale. A 3t/ac spring barley crop would remove about 1.5t/ac of straw, which would be 10 4x4 round bales at 150kg/bale.
Using these numbers, the winter wheat crop should equate to about €67.50/ac for the straw but the spring barley crop might only turn into €45/ac. However, this latter value is still better than the lowest prices of €7/bale off the field, assuming €3 to bale it and 10 bales per acre. The contract price pays the grower to gather and store the straw and so it has the potential to leave more money .
Tom stated that this deal is very much about establishing a floor on the price of straw and it very much does that. He went on to advise growers to commit no more than 20% to this deal so as to avail of any uplift in price on the remaining 80% of straw.
But it’s not just about price. Where else can you sell straw forward at a price equivalent to €30/t? This is technically a 15-year deal for a proportion of a farmer’s straw and the price is index-linked on the upside. As well as that, Tom said that 20% of the contract payment is to be paid in July, 30% is to be paid during harvest and the remaining 50% is to be paid on delivery.
Tom said that about 40,000t of straw has been committed since the previous negotiations, so 20,000t to 30,000t are now needed as commitment from growers to complete the deal. Tom emphasised that any type of straw – wheat, barley, oats, rape or beans – can be used to supply the contract. However, moisture is a real issue and straw may take a lot of work in some years to ensure that it is put into store within spec.
Supplier company to be established
While the IFA has been the primary negotiator of this deal, Tom Shortt said that a company will be set up to manage the affairs and organise the logistics required. This will be essential for the ongoing project.
Tom also said that New Leaf will provide capital to build straw stores where they are needed as the straw will have to be kept dry for burning post delivery.
The repayments on such capital would then be repaid as a deduction from the payment over the duration of the contract.
Asked about the possibility of a bad year, Tom commented that we have virtually never failed to gather straw, even if it took some time and a level of losses from turning, etc.
He then suggested that a fund may have to be put in place to help cater for the bad years which will happen. But this contract is still no more risky than supplying any other market.
New contract for 60,000t of straw agreed with Bord na Móna.Price is €60/t payable as 20% in July, 30% at harvest and €50% post-collection. Price is index-linked.The deal has a 15-year lifespan.The company intends to produce electricity, dry timber with waste heat and pelletise the residual ash.
The headline value of a new deal for straw negotiated between the IFA and Bord na Móna is €60/t ex store. The deal brings to a conclusion the original negotiations with Biotricity a few years ago.
Announcing the deal at a recent IFA meeting in Co Laois, Tom Shortt of the IFA said that the deal should help to put a floor in the straw market by providing demand for an additional 60,000t of straw and by providing an index-linked 15-year deal in the process.
The deal revolves around a €100m investment to build a new electricity generation plant on a greenfield site in Rhode, Co Offaly. This will use straw to generate electricity and use the residual heat to dry timber that will be brought on to the site. There is also a plan to pelletise the ash and move it back on to farms as a source of fertiliser.
The price of €60/t is based on a challenging 14% moisture content. However, moisture contents from 8% to 20% are acceptable but subject to a 50c price adjustment per point above and below 14% moisture. The deal requires that straw be baled and moved into store post harvest and the price is then a loaded ex-store price. The growers must pay for baling, transport to their sheds and loading on to the dellivery trucks.
While the deal is with Bord na Móna, it is understood that the new entity in Rhode will be called New Leaf. The company will pay for the transport from the farm to the plant in Rhode but the farmer must load the truck.
Against this background Tom suggested that the €60/t price equates roughly to €30/t for the straw and €30/t for baling, delivery to store, storage, etc. As a general rule, most cereal crops will grow roughly the same amount of straw as grain so a 4.5t/ac crop of winter wheat will grow just under 4.5t/ac of straw. But only about 50% of the straw is harvested due to leaf loss, chaff or awns and the remaining stubble. And of these the height of the stubble can be the biggest variable.
These numbers equate roughly to what happens in practice. At 50% recovery, a 4.5t/ac of winter wheat straw would take off 2.25t of straw which equates to 4.5 big bales (8x4x4) at approximately 500kg/bale. A 3t/ac spring barley crop would remove about 1.5t/ac of straw, which would be 10 4x4 round bales at 150kg/bale.
Using these numbers, the winter wheat crop should equate to about €67.50/ac for the straw but the spring barley crop might only turn into €45/ac. However, this latter value is still better than the lowest prices of €7/bale off the field, assuming €3 to bale it and 10 bales per acre. The contract price pays the grower to gather and store the straw and so it has the potential to leave more money .
Tom stated that this deal is very much about establishing a floor on the price of straw and it very much does that. He went on to advise growers to commit no more than 20% to this deal so as to avail of any uplift in price on the remaining 80% of straw.
But it’s not just about price. Where else can you sell straw forward at a price equivalent to €30/t? This is technically a 15-year deal for a proportion of a farmer’s straw and the price is index-linked on the upside. As well as that, Tom said that 20% of the contract payment is to be paid in July, 30% is to be paid during harvest and the remaining 50% is to be paid on delivery.
Tom said that about 40,000t of straw has been committed since the previous negotiations, so 20,000t to 30,000t are now needed as commitment from growers to complete the deal. Tom emphasised that any type of straw – wheat, barley, oats, rape or beans – can be used to supply the contract. However, moisture is a real issue and straw may take a lot of work in some years to ensure that it is put into store within spec.
Supplier company to be established
While the IFA has been the primary negotiator of this deal, Tom Shortt said that a company will be set up to manage the affairs and organise the logistics required. This will be essential for the ongoing project.
Tom also said that New Leaf will provide capital to build straw stores where they are needed as the straw will have to be kept dry for burning post delivery.
The repayments on such capital would then be repaid as a deduction from the payment over the duration of the contract.
Asked about the possibility of a bad year, Tom commented that we have virtually never failed to gather straw, even if it took some time and a level of losses from turning, etc.
He then suggested that a fund may have to be put in place to help cater for the bad years which will happen. But this contract is still no more risky than supplying any other market.
New contract for 60,000t of straw agreed with Bord na Móna.Price is €60/t payable as 20% in July, 30% at harvest and €50% post-collection. Price is index-linked.The deal has a 15-year lifespan.The company intends to produce electricity, dry timber with waste heat and pelletise the residual ash. 
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