12 May 2000

Supply management is grain traders key goal

Deliver the grain that

customers want, when they

want it, as efficiently as

possible. Thats the way to

secure best grain prices,

says one leading marketing

co-op. Suzie Horne reports

EFFECTIVE, efficient trading is the aim at Group Cereal Services, which markets the arable produce of 800 farms, including the whole of Velcourts combinable cropping.

That will amount to more than 760,000 tonnes this harvest. The cost-effective management of such a quantity of grain has been helped by the investment of more than £250,000 in software over the past two years.

"Nothing should get in the way of good supply management," says GCS director of trading Graham Lacey. "Marketing strategy and cash flow requirements should be managed alongside physical supply rather than adversely influencing it."

The new software has helped the Andover, Hants-based company produce a saving of almost £200,000 in the first year. It is a basic tenet of Mr Laceys policy that journey lengths should be optimised.

"The grain market is inherently inefficient. A lot of grain goes straight past two homes on its way to another customer. We are looking to minimise these journey lengths while remaining aware of opportunities that may cause us to send grain further if that will produce a higher net return for our farmers.

"It is the amount of money on the cheque rather than on the contract that matters. This means that we not only want to match what is available most closely to what is wanted, but we also need to assess the risk of variable qualities so that allowances are able to be agreed and rejections minimised."

The groups success and reputation among members and customers is built on this attention to detail. The new software enables accurate stock control, quality recording of 11,000 bins of produce and matching of both the customers delivery and the growers collection requirements.

Growers are asked each season to fill in details of loading equipment, days or dates when loading will be convenient/inconvenient, and this is updated through the year.

An important part of GCSs philosophy is to shorten the supply chain. This does not just mean cutting out merchants and their margins.

A shorter chain also improves haulage and storage efficiency, and ultimately produces a greater understanding of each partys requirements, restrictions and risks.

"We are trying to sell further into the market. We do influence at the most basic level what people grow, so that we get the most suitable material for local markets. Its not a "quality is God" message."

Mr Lacey believes that customers will increasingly develop and demand the varieties they know will do the job, rather than coping with what is produced. The groups recent agreement to supply 30,000t of wheat a year to Warburtons bakery in Lancs illustrates this.

Knowing exactly what tonnage of each variety it will have in each store enables CGS to hold post-harvest meetings with its main customers, especially millers, to see how they might be able to use the crop.

Having detailed quality and loading information covering such a large tonnage, GCS can take advantage of its size and ability to gather large tonnages of known quality at relatively short notice.

This gives it a trading advantage, for example in grading and blending to meet shipping requirements. "A 50,000 tonne vessel may be looking for the last 15,000 tonnes. We can supply that but at the same time we can do it on the basis that we will supply the average quality required," says Mr Lacey.

"This means we would not be subject to the deductions that a farmer would face on individual loads which did not meet the spec."

Matching the right grain to the nearest home is vital if farmers are to get the best returns, says Graham Lacey.

Independent expertise aids Velcourt

Independent expertise in adding value to farm grain is what Velcourt was seeking when its board decided to commit most of the groups combinable crop production to GCS.

The agreement, covering much of the farming firms arable cropping on 34,000ha (84,000 acres), began in 1999. Until then, grain marketing policy had been in the hands of senior executives at the Velcourt Group.

"We decided that we needed to secure the expertise needed in todays market to manage the marketing of our crops against the background of factors over which we had no influence," says chief executive James Townshend.

"We couldnt afford the resources to do this ourselves. If we relied on a merchant they had their own interests at heart. We liked the idea of Group Cereal Services because they are a marketing agent and do not trade on their own account."

Meetings are held regularly between Velcourt and GCS to determine both an overall marketing strategy and one specific to each farm or estate. Rotation planning, variety choice, judging the relative values of different crops and what markets to aim for are all discussed.