Futures store proves a premium decision
By Amanda Dunn
HOW do you squeeze more value from feed grain during these times of miserably low prices?
For one farmer/storekeeper becoming a registered futures grain store was the key to regularly achieving a £2/t premium.
"Since we became a registered futures grain store earlier this year we have been able to tender grain straight on to the futures market," says Phil Moffat, manager at Bedfordia Grain Services. "As this market typically trades above the ex-farm price it means we, and our customers, are getting on average an extra £2/t."
Of the farming businesss 27,500t storage, 19,500t is now registered for futures grain, with 10,000t allocated for the farms own cereals, 8500t for a merchants futures cereals and the balance taken up with rape seed and independent farmer storage. "When it comes to selling grain we will ring our local traders and find out current prices. Then we will go to our broker and tell him what we want to sell and at what level.
"There may already be a bid in the market at this level, so we may be able to sell straight away. Otherwise we will leave him some leeway to work with.
"We can also give him longer term instructions, such as if it gets to £69 for May, sell 500t, and ask him to act on these instructions if and when bids come into the market," says Mr Moffat, who pays a 25p/t brokerage fee.
"For our customers we can either act on their behalf or recommend an appropriate broker for them to work with direct."
When it comes to month of movement, the grain can be either physically delivered or the position closed by trading out of it. "Only a small percentage of grain traded on the exchange physically changes hands," says Mr Moffat.
"If we decide to physically settle, we will advise the clearing house. The buyer who purchased the grain becomes obliged to take delivery within seven days and also pay within seven days.
"Our only commitment is to supply the grain free on lorry and to guarantee quality. If the buyer decides not to move it, a rental of 3.5p/t/day then becomes due. For grain that has already been paid for that is a definite bonus.
"Part of the exchanges requirements for stores is to keep tendered grain separate," says Mr Moffat. "We are very fortunate that with the multiples of silos we have, the site lends itself to segregation. That means we can offer even the smallest lot for storage.
"For those customers within easy reach of the store, they can benefit further by hauling the grain themselves and taking advantage of the £3/t difference between ex-farm and delivered prices," he adds.
Registered since June, the store has already traded several thousand tonnes of grain via the futures exchange at an average £2/t gross premium over ex-farm. *
A shift to storing grain for the futures market is boosting values by an average of £2/t for the home farm and neighbours, says Phil Moffat of Bedfordia Grain Services, near Bedford.
• Satisfactory turning circle.
• Minimum 5000t for registration.
• Weighbridge on site.
• Minimum outloading – 80t/hr for 5000-10,000t, 100t/hr for 10,001-15,000t.
• Adequate ventilation/aeration equipment.
• Minimum net assets of £55/t.
• Undertake exchanges own "all risks" insurance.
• Open in line with exchanges business days.
• £150 application fee.
• Inspection – normally by Intervention Board inspector.
• Annual registration charge.
• Monthly admin requirements.
• Typically £2/t premium over spot market.
• 50p/t rates.
• 25p/t brokerage.
• 3.5p/t/day storage.
• Wheat spec: 72.5kg/hl, 15% moisture, 2% admix (0.001% ergot).
• Barley spec: 62.5kg/hl, 15% moisture, 2% admix, 8% sprouted grains.