Treat customers as King
FORGING CLOSER links with customers is John Hutcheson”s strategy for minimising fluctuating commodity market risks.
Until 2004, the 350ha (865 acres) of feed wheat production from Leckerstone and Broomhill Farms, Dunfermline, was split between supplying distillers and Grampian Country Food”s Edinburgh mill for poultry rations.
Now almost all goes to the mill, just 20 minutes away, thanks to a contract set up through farmer-controlled grain group Grainco.
“I”m happy to concentrate on one customer,” says Mr Hutcheson, who believes location and communication are the keys to the partnership developing successfully.
Grampian lorries collect grain regularly right through to July, with the firm speaking directly to him to arrange loading. “Part of the success is being flexible in regard to when lorries can come in.
” That close co-operation is possible only through the co-op-style marketing group, he stresses.
“Traditional grain merchants have less reason to encourage closer links for growers. Through the co-op we are much more involved in the whole process.
” Another advantage is more price transparency. “I know exactly what the haulage costs are, what the group takes and what price my customer is actually paying. With merchants you don”t always know that.
” Grainco”s trader, Edward Rust, advises when to sell, he says. “We”re encouraged to take forward price protection as soon as a crop is in the ground.
” That paid off for last harvest. “He had to twist my arm to sell forward in February 2004, when spot prices were high, and new crop prices were not so attractive. But it was absolutely the right thing to do. Our average wheat price will be 80/t.
” Marketing tools, such as options to take advantage of price rises, are also used. “They are really important in helping to iron out any fluctuations and minimise the risk of having to sell at below the cost of production.
” Eventually, he hopes to get even closer to Grampian. “I would really like to get to where I”m loading grain for them most months of the year, but it”s still early days.
” Mr Hutcheson also has good relations with Quaker Oats, his spring milling oats buyer.
“It”s our third year of supplying them with non-PGR oats, which are used to produce a cooked breakfast cereal for the Danish market.
” As part of the 30-strong suppliers” group, he has regular meetings with the company to discuss pricing, and just as importantly, how crop quality can be improved.
Total 930ha (2298 acres)
Tenant + contract arrangements
Medium/heavy soils Leckerstone & Broomhill Farms
2005 cropping & rolling average yields
Ha t/ha W wheat 296 8.9
WOSR 112 3.2
W barley 107 7.4
Sp wheat 59 (1st year)
Sp barley 104 6.2
Sp beans 44 4.9
Sp oats 103 5.2
Set-aside 89 n/a
Rural stewardship schemes 16 n/a
