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Think like a racing driver when selling your grain

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This blog was first featured as an article in the October issue of Three Counties Farmer:

There are few jobs that could be classed as 24/7, 365 days a year but farming is one of them. For those who sell their combinable crops, the grain market is ever changing and the global markets also sit within this 'open all hours' bracket. We often draw parallels between politics, global stock markets and our UK grain markets, considering which global events will have an impact and more recently if 'fake news' is indeed that. If I had £1 for each time a grower asked me, "What's the story here?" I'd be doing very well for myself!

The wheat market is notoriously volatile. We could see a £3 upside in six hours or a £4 downside in three. It is important to manage this upside/downside risk and take advantage of the opportunity to sell your grain at a higher price, as the window of opportunity can be incredibly small. It would be safe to say the objective for all is profit; aiming to sell grain at a higher price than the cost of production and, vitally, selling to your margin and store requirements.

The price spikes we saw in 2007 were very much weather driven but, even taking this into account between 2000-2018, the average forward harvest price at this point in the marketing period is approximately £125/t. If we look ahead to harvest 2020, still considering those previous highs, the price at the time I write this shows £20 above this average and is holding well. The question for many now is, "Should we be taking advantage of this?"

Other factors to consider are current market drivers. The world may be changing; with more people to feed, we are growing more grains globally and more acres are being pulled into production. Russia is now the world's largest exporter. Granted, weather extremes will come and go but wheat has shown us, again, how resilient it is – prices very much revolve around supply and demand. If more is available, will these forward prices drop? Should we be hedging our bets and taking advantage whilst the opportunity is there?

It is important to keep price movements in context and not become too disheartened if the market starts to fall back. There could still be a prime opportunity to take advantage of before the price hits the bottom and, if you forward sold at a higher price, instead of thinking, "I wish I'd done more" perhaps you should be thinking, "I'm glad I sold what I did!" The 2018 crop will be the first that is partially marketed after 29th March 2018 and there is still a degree of uncertainty around Brexit and the effect it will have. Aside from spot and forward selling, many growers use pools as a way of diversifying their marketing strategy, using the expertise of experienced grain traders to market their grain and diffuse the conundrum of "Should I sell and how much?"

So, what's the moral of the story? Without a doubt, windows of opportunity can be brief and are there to be taken advantage of. Think like a racing car driver – look forward to where you've got to go, plan your moves, take advantage where you see opportunity and don't look back at what's already happened. Within the Three Counties, we benefit from local homes offering strong prices and high demand; a good market to be selling into.

For advice around the grain markets and marketing options, please speak to your Frontier farm trader.




Hannah Walton

Farm Trader

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Thursday, 13 August 2020

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