Trackers for cereals
TRACKER funds, increasingly popular among shareholders in the City, are spreading to agriculture to help cereal farmers cope with increasingly volatile markets.
Growers who sign up to the recently launched Soufflet Tracker will receive not less than the average of the market price for the period they remain in the scheme, says the companys Nigel Goodhew.
The top to bottom trading range for futures has been large in recent seasons (see graph), he says. This, and increased volatility, means the chances of making a bad selling decision are amplified. "This has had a major impact on growers returns over the past few years."
The fund protects against these extreme price movements by selling a proportion of the committed tonnage onto the futures market each day.
It is completely transparent, says Mr Goodhew, since the grain fund is priced on the daily LIFFE closing prices. An oilseed fund is also being offered. A growers individual fund starts on the day after he joins, and ends on the 15th of the month before the contract month. The ex-farm price is calculated on a discount on the futures agreed at the time of setting up the contract.
There are no initial joining charges, and no exit fee. "The schemes simplicity allows management costs to be kept to a minimum," says Mr Goodhew.
"We are not saying that Tracker should be used for the whole crop, though some farmers are doing so. It should be used as part of the marketing strategy," says Peter Francis of the Bury St Edmunds office.