A favourable growing season, followed by a good harvest has seen excellent wheat yields.However, given the current downward pressure on prices, many growers are cautious about selling, preferring instead to hold out for an improvement in the market.
One constructive and valuable alternative could be Frontier's wheat modified floored average (MFA) contract. This risk management tool allows growers to fix a minimum price for their wheat, yet still benefit from future improvements in the market.
Andrew Hill, grain origination team leader for Frontier acknowledges that farmers are reluctant to sell at the moment "UK feed wheat prices are at their lowest for four years and while some growers are hoping that values will lift, the current market shows little evidence of price improvement. The MFA is an ideal tool in this situation as it sets a minimum price and provides additional value back to the grower if the market improves"
The contract offers movement to suit the grower and prompt payment, improving cash-flow and eliminating logistical and financial pressures of storage. That is a particular benefit in a harvest where above average yields may have put pressure on farm storage space.
For Andrew, an additional advantage of this particular contract is the simplicity, "The grower doesn't have to worry about following the market and fixing a price as the modified average is closed out and calculated for them."