Transfer Pricing Tool
for Agriculture

Transfer Pricing for Agriculture: OECD Methodology

Agriculture transfer pricing is fundamentally driven by commodity pricing. When agricultural products — grains, oilseeds, sugar, coffee, cocoa, palm oil, livestock — are sold between related parties within an agribusiness group, the OECD Transfer Pricing Guidelines require that the intercompany price be arm's length. The CUP method using published commodity prices is the most reliable approach, following the same principles as energy commodity pricing under OECD ¶2.18–2.20. Agricultural commodity exchanges (CBOT, ICE Futures, Euronext) and price reporting agencies provide benchmark prices for the most widely traded agricultural commodities.

The deemed pricing date concept applies to agricultural commodities just as it does to oil and gas. The intercompany price should reference a published price on a date consistent with the actual terms of the transaction — the date of shipment, the date of contracting, or the date of delivery, as specified in the intercompany agreement. Adjustments to the published commodity price may be needed for quality differentials (protein content for wheat, moisture levels, impurities), delivery location (basis differential between exchange delivery point and actual delivery location), volume, and Incoterms. For non-exchange-traded commodities (specialty crops, organic produce), CUP data may come from local market surveys, broker reports, or industry pricing guides.

For processing services — milling, refining, packaging, cold storage — the Cost Plus method is standard. The processing entity's cost base (raw material handling, processing costs, labour, overhead) is marked up to reflect an arm's length return for routine processing. Markups typically range from 2% to 8%. Agricultural IP licensing — for proprietary seed varieties, crop protection technology, or precision agriculture data platforms — is an emerging and complex area. Where comparable license agreements for seed technology exist (e.g., licensing agreements between independent seed companies), CUP may apply. For novel varieties with significant R&D investment and no direct comparables, profit split or residual profit allocation may be more appropriate — this is not implemented in this tool.

Recommended Method: CUP (Comparable Uncontrolled Price)

For agriculture entities, the cup (comparable uncontrolled price) is typically the most appropriate transfer pricing method. This tool pre-selects this method based on industry best practice and OECD guidance. Typical arm's length ranges for agriculture are 2–8%.

Typical Agriculture Intercompany Transactions

Intercompany commodity sales — Sale of agricultural commodities (grains, oilseeds, sugar, coffee, cocoa) between related parties. CUP using published commodity prices from exchanges (CBOT, ICE, Euronext) or local market indices. Preferred method: CUP (Comparable Uncontrolled Price).

Processing services — Related-party processing plant (milling, refining, packaging) processes raw agricultural products on behalf of a trading or marketing affiliate. Cost Plus for routine processing. Preferred method: Cost Plus Method.

Seed technology and crop protection licensing — IP-owning entity licenses proprietary seed varieties, crop genetics, or agricultural technology to farming affiliates. CUP if comparable license agreements exist; may require profit split for novel varieties. Preferred method: CUP (Comparable Uncontrolled Price).

Regulatory Context

Agricultural commodity TP is high priority in resource-exporting developing countries (Ukraine, Brazil, Argentina, Indonesia). OECD ¶2.18–2.20 commodity guidance is the key reference. EU Common Agricultural Policy (CAP) subsidies interact with TP for EU agricultural entities.

Limitation: This tool supports CUP for commodity pricing and Cost Plus for processing services. For seed technology IP licensing requiring profit split analysis, consult a specialist.