Two suppliers quote the same product. One number is lower. In agricultural trade that comparison is almost never valid as it stands, because the two numbers are usually answers to different questions: a different delivery point, a different currency, a different payment term, a different tolerance, a different pack.
This guide does three things. It sets out the four pricing structures actually used in the trade and when each is appropriate. It itemises what sits inside a delivered number. And it gives a normalisation routine that turns two offers into a like-for-like comparison.
No figures appear anywhere in this guide. Prices in this category move with the crop, the currency and the freight market, and a number written down in a reference article is wrong before it is published. What is stable is the structure.
The four structures
Fixed price for a defined volume and period
The seller commits a price for a stated quantity over a stated window. It is the default for finished goods and for most frozen and dried programmes, and it is what a retail buyer needs in order to set a shelf price.
It works when the seller can cover the position: either the raw material is already bought and processed, or the seller has a hedge or a matched purchase. It fails badly when a seller with no cover writes a fixed price across a crop transition and then has to choose between honouring the contract at a loss and finding a reason not to. The failure shows up as a quality dispute rather than as a price dispute, which is why an unusually attractive fixed price into a new crop deserves a question about how the position is covered.
Practical guardrails: state the volume, the period, the tolerance on volume, and what happens if the buyer takes materially less than nominated.
Formula or index-linked pricing
The price references a published quotation, an exchange settlement or an agreed index, plus or minus a differential for quality, location and timing. This is standard in grains and oilseeds and increasingly used for bulk oils.
It works where a liquid, published reference exists and the physical product can be described as a differential to it. It is unusable in categories with no reference price, which includes most of the frozen berry and dried herb trade, where every attempt to build an index has foundered on the heterogeneity of the product.
The differential is where the negotiation actually happens: origin, specification, delivery month, packaging and counterparty risk are all in it.
Cost-plus and tolling
The buyer supplies or nominates the raw material and pays a conversion fee, or the parties agree an open-book cost build with a defined margin. It is common in private label where the buyer already contracts the raw material, and in processing arrangements where the buyer owns the crop.
It works when the cost base can genuinely be audited and when both sides accept transparency. It is the right structure when raw material volatility is the dominant risk and neither side wants to price it, because it separates the volatile component from the stable one. It fails when “open book” means a spreadsheet nobody may verify.
Practical guardrails: define the yield assumption explicitly, and define who carries the loss when actual yield differs. Yield is where a tolling agreement is won or lost.
Spot and forward
Spot is priced at or near the moment of sale for prompt goods. Forward is priced now for delivery later. In a seasonal category the two are structurally different products: spot from a finished cold store is a known lot, forward against a crop not yet harvested is an obligation with a production risk attached.
A spot offer for material already in a European cold store carries no origin, transit or customs risk for the buyer, and should be compared with a forward third-country offer only after those differences are priced.
What sits inside a delivered number
For a frozen or dried product delivered into the Union, the build is roughly the following. Shares vary enormously by commodity, so this is an anatomy and not a distribution.
- Raw material at the gate. Field or grower price, harvest labour where the buyer’s programme requires it, and any grower premium for certification.
- Yield. The conversion loss between raw intake and saleable finished product: trimming, sorting out defects, pitting, calibration bands that fall outside the sold grade, drying shrinkage. This is the single largest lever in most processed categories and it is where two plants with the same raw material price end up with different costs.
- Processing. Line time, labour, energy for freezing or drying, water, waste handling, and the changeover cost that also drives the minimum order quantity.
- Packaging. Film or liner, carton or sack, pallet, stretch wrap, and print. A printed private label format carries a plate and a minimum print run that a plain format does not.
- Quality and compliance. Analysis, certification scheme fees, audit days, and the documentation the destination market requires.
- Cold store or warehouse. For frozen goods this is a recurring cost for as long as the goods sit, and a long fixed-price period with buyer-nominated call-off transfers that cost to the seller unless the contract says otherwise.
- Finance. The cost of money between paying the grower and being paid by the buyer. In a seasonal crop the seller funds the whole harvest in weeks and recovers it over months.
- Logistics. Everything the Incoterm allocates to the seller: inland haulage, loading, export formalities, main carriage, insurance, import formalities, delivery.
- Duty and border cost. Where applicable, plus the cost of the origin evidence needed to claim a preference.
- Risk and margin. Currency, counterparty, crop, and the seller’s return.
Three things that move the number without changing the product
The Incoterm
The delivery term decides how much of the logistics chain is inside the price. An ex works number and a delivered number for the same pallet differ by the entire transport, formality and risk envelope between them. Comparing them directly is the most common error in the category, and it is examined in detail in FOB against CIF pricing and in the Incoterms entry.
Two secondary points. The named place matters as much as the three letters: delivered to a border crossing and delivered to a distribution centre four hundred kilometres inland are different prices. And the term allocates cost and risk, not customs status; a delivered term does not by itself make the seller the importer of record unless the term chosen says so.
The currency
A euro price, a dollar price and a hryvnia price for the same goods embed different risk positions. Whoever is exposed will price the exposure, and if neither side hedges, one of them is simply gambling. Where a seller’s costs are largely in local currency and the sale is in euro, a sustained move can turn a profitable contract into a loss-making one, and the pressure surfaces as a request to renegotiate mid-season.
Settle three things in the contract: the currency, the reference rate and source if any conversion is required, and whether a move beyond a defined band triggers a review.
The payment term
Payment terms are price. An advance payment funds the seller’s harvest and should be reflected in the number. Ninety days after delivery is a credit facility the seller is extending, and it is priced whether or not it is itemised. A letter of credit shifts the risk to banks and adds bank charges and documentary rigidity on both sides.
When comparing two offers, convert the payment term difference into a cost of money over the difference in days and add it to the earlier-payment offer.
Price review and revision clauses
For contracts longer than a single shipment, the mechanism for changing the price matters more than the opening number.
A price review clause should state what triggers a review, what the reference is, how much of the move passes through, how often a review may occur, and what happens if the parties do not agree. A clause that says the parties will discuss the price in good faith is not a clause; it is an agreement to have an argument later, with the party under less pressure holding the advantage.
Force majeure and crop failure are separate and should be drafted separately. A short crop is usually foreseeable enough that it is not force majeure, and a contract that leaves this to a general clause invites a dispute in exactly the year when the goods are most valuable.
Normalising two offers
Run this before comparing. It takes an hour and it changes the ranking more often than not.
- Restate both offers at the same delivery point under the same Incoterm, adding or removing the transport, insurance and formality legs.
- Restate both in the same currency at a single stated rate.
- Adjust for packaging: same pack format, same net weight, same pallet configuration, same print status.
- Adjust for specification: same grade, same defect tolerance, same quality tolerance, same analysis panel. A wider tolerance is worth money and should be priced, not admired.
- Adjust for payment terms using a stated cost of money.
- Adjust for volume commitment: a price contingent on an annual volume is not comparable with a per-shipment price unless you intend to take the volume.
- Add the cost of the things the cheaper offer does not include: pre-shipment inspection, third-party analysis, a longer lead time, a higher minimum order quantity that forces you to hold stock.
- Add a risk allowance for supplier maturity, using the evidence in your supplier approval file rather than an impression.
What survives that routine is a comparison. What does not survive it is the reason buyers switch suppliers and then discover why the price was lower.
Vorezan does not publish price indices, does not act as a broker and does not take positions in the commodities described here. Pricing structures and contract clauses should be settled with the operator’s own commercial and legal functions.
