20 June 1998

SUCCESSFUL STRATEGIES

THE Great Grain Marketing Challenge is over and, like all good sporting events, when the dust is settling its time for some analysis. Looking back, the twists and turns of the market appear easy to read.

At the time, however, calling the top or bottom of any market is no easy task. Just as in three weeks time we will all know who won the World Cup and how they did it, everyone now has a different view.

Picking winners is no easier for the fact that your livelihood and the success of your business depends on achieving success, or at least avoiding failure.

Like all sporting commentators the temptation to indulge in some "what ifs" is irresistible. With perfect market knowledge the ultimate trader would have sold the 1,260t of Rialto, 1,300t of Riband and 600t of rape for a grand total of £370, 540 or £109t for the Rialto, £94 for the Riband and £185t for the rape. The winners got impressively close to these figures.

The competition was more subtle than just achieving the best prices, the challenge took account of the timing of sales and interest payable on the variable costs of growing the crops. However with IACS cheques arriving at Christmas, the effects of interest charges are reduced, and the competition was eventually won and lost on trading decisions, not by management of the bank balance.

Difficult market

Competitors grappled with a difficult 1997/98 market. Prices were buffeted by sterling, a poor quality wheat crop in the UK and a European and world surplus of feed grain.

Other factors were sluggish third country exports thanks to the European Commissions strategy and larger than usual imports of milling wheat in to Britain.

Several selling strategies were employed by the competitors – some more professional than others.

The eventual winner, Ian Brown, from Harlow, went for an all or nothing approach which would be risky in a real market but paid dividends in the competition. He made only three sales, selling 100% of each commodity on each occasion. His timing for the wheat sales was excellent in selling in October and November, for movement in January and May. Mr Brown missed the top of the rape market selling too early in November for May movement.

Mr Brown achieved sale proceeds of £347,600 or 93% of the theoretical maximum – by any standards an excellent performance. Other competitors also sold very well with second placed Mark Ireland, from Lincs, achieving only £2,500 less in sales.

One strength of farm businesses growing a variety of different crops and therefore selling to a variety of markets is illustrated by the performance of the oilseed rape market. Rising oilseed rape prices thanks to unprecedented world demand for vegetable oil ensured a firm market for rapeseed in the UK.

Good rape sales allowed some last minute sellers to turn in respectable performances despite weak wheat prices. This is illustrated by the comparison (above) where by selling late the 20th placed contestant achieved a better rape price than the winners, but failed overall because the wheat market had slipped so much.

The marketing lessons for next year are that getting the right day to sell, not necessarily the right price on the day is the way to succeed.

Getting the right day is a matter of watching the market consistently and dovetailing the requirements of cashflow and storage space with the marketing opportunities available, this takes planning in terms of business requirements and market knowledge in terms of the opportunities, skills which the winners have clearly demonstrated.

First prizewinner Ian Brown recieves travel vouchers worth £1,500 with £500 in vouchers for Mark Ireland. Travel section winner Philip Simpson, of Cargill, celebrates with a case of champagne. The Great Grain Challenge was sponsored by Lloyds TSB and Banks Agriculture in conjunction with the HGCA and the Chamberlain Partnership.