Grain pools: Helping growers add value and manage risk
Interest in joining a grain pool has soared in the past two years for one farmer co-op, as growers look to manage risk and add value during a period of low grain prices.
Pool marketing is where growers commit an individual tonnage, along with other farmers, to create a critical mass to be marketed by a dedicated team of traders.
At £180/t, wheat marketing is less of a challenge, but pools are a valuable tool for growers when prices are low, explains Fengrain managing director Rob Munro.
“Grain marketing is complicated and time-consuming and getting it right under these circumstances is essential.”
Fengrain in a nutshell
Fengrain was established by a group of farmers 42 years ago to provide a co-operative resource to market their grain more effectively.
Today the co-op has more than 900 company members, of which 200 hold storage rights.
It has 110,000t storage capacity at its base near March, Cambridgeshire, plus 60,000t contracted on-farm storage. It also uses 25,000t of port-side storage in Kings Lynn, Ipswich and Rye for exports.
Fengrain is not primarily a storage co-op. Its main operation is marketing grain to add value to farmers and customers alike.
Growers don’t have to be members to work with Fengrain. Last year, it traded with 1,200 farmers, offering both ex-farm delivery and central storage.
It marketed almost 700,000t of combinable crops last year, including wheat, barley, oilseed rape, oats, linseed and pulses.
This year the co-op is expanding into Kent by opening an office near Canterbury. It will also expand its presence in Norfolk by building 10,000t of storage at Crisps Maltings on the co-op’s site in Great Ryburgh, Norfolk.
“We saw an opportunity to duplicate our model in Kent, as there are few other options for growers. We believe our co-operative approach will also work well in Norfolk,” says Mr Randle.
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“Last year we saw a 36% increase, and this year has seen another 40% increase in pool tonnage, with over 55% more growers using our pools,” he says.
There are different pool marketing options depending on a grower’s movement and cash requirements. For example, the harvest pool is moved in August and September.
The short pool is sold from April to September and moved in October to December, and the long pool is traded from April to March and moved from April to June, he says.
Once grain is committed, growers can access a range of pre-payment options to assist with cashflow demands.
A popular option launched recently is the Fengrain variable pool, which offers flexibility.
Mr Munro explains that if growers commit to a certain tonnage, they can deliver 25% above or below the target if yields prove to be better or worse than forecast.
Premiums
But it’s not just about minimising risk. The co-op has built strong relationships with end users, which help farmers access premiums on milling, Group 3 biscuit and Group 4 hard wheats.
“Fengrain is marketing driven and not just a storage co-op. The store is used as a tool to help capture more value for farmers,” explains business development director Paul Randle.
For example, the store is used to segregate individual varieties. One example is Crusoe, where segregation can help to capture a few extra pounds a tonne for farmers.
About 60-70% of the total tonnage handled by the business goes for human consumption, including iconic household brands.
Fengrain is one of two preferred suppliers to Weetabix and it works with growers to make sure they meet the customer’s quality requirements.
Members of the Weetabix Growers Club must be within 50 miles of the Burton Latimer factory to minimise food miles, in an environmental scheme, maintain soil sulphur levels and strictly control mycotoxin levels.
©Tim Scrivener
Brand security is key for the manufacturers. They require full traceability, therefore all Fengrain’s suppliers need to be crop-assured.
Fengrain is also a major supplier to a leading biscuit manufacturer. Growers can earn a premium on Group 3 varieties such as Claire, Scout and the newer Spyder and Barrel.
Consistency
Growers are responsible for meeting defined quality specifications. “Consistency is key, as any deviation causes production issues in food manufacturing.
“This could mean the biscuits will not fit the packets, or bread will not meet customer expectations,” says Mr Randle.
The store also helps millers changing over from old- to new-crop supplies.
“We are local to many of our customers and can store quantities of old-crop to the end of September to help ease the transfer and maintain consistency. This is a strategic reason for customers using us as a preferred supplier.”
Fengrain also supplies bread-making wheat to the major flour mills such as Hovis and Whitworths and it has relationships with major food manufacturers and retailers.
It supplies barley to UK and European maltsters; oilseed rape to UK crushers, compounders and for export; and pulses are supplied to the UK food industry as well as exported to North Africa.
Milling wheats help add value
Stephen Mead
Stephen Mead, WH Mead and Sons, Guyhirn, Cambridgeshire
Stephen Mead was a founder member of Fengrain and he uses the co-op to market a proportion of his milling wheat. Mr Mead has 210ha of cropping, including 28ha sugar beet, 32ha oilseed rape and 150ha milling wheat.
Depending on the season, he markets 50-65% of grain through Fengrain. In previous years, he grew Group 3 wheats for biscuit making, but even with a modest fertiliser regime, he achieved 13% protein with Scout.
So to make more of his protein, this season he is growing only milling wheat varieties – Crusoe, Gallant and Trinity – to capture bigger premiums.
This year, he anticipates securing a £7-8/t milling premium which, while lower than the £20-£30 in a more typical year, still helps add value.
Spread risk by using marketing pool
Sam Markillie, Trinity Hall Farm, Wisbech, Cambridgeshire
Sam Markillie uses Fengrain to market the majority of crops grown on his 900ha fenland farm near Wisbech.
Mr Markillie grows 500ha of winter wheat, a 50:50 split between the Group 1 variety Gallant and Group 2 Cordiale. He also grows 130ha of spring barley, 140ha of spring beans, 100ha of oilseed rape and the balance of his acreage is in sugar beet.
This year he is selling all of his spring malting barley through a marketing pool and he has also committed 10-20% of his winter wheat crop.
“I like to have some balance, so I have chosen to market through the pool, as it spreads my risk. I also want to benchmark to see if I can beat it.
“When markets are turbulent, I think people do tend to increase the amount they put in pools, and I know they return good results. But I like the challenge of marketing my own wheat too.”
However, Mr Markillie uses a variety of minimum-premium price contracts, offered by the co-op, on 100% of his winter wheat as another approach to spread his risk. These give greater certainty ahead of drilling to guarantee a minimum price for quality.
He believes Fengrain does an excellent job of looking after the end-users taking the grain, which opens up opportunities to secure the premiums he needs as a grower.
“Fengrain is very good at supporting its customers at the top end. It is a relationship built on trust and quality and I want to be involved in that, to add value and supply some of the local mills.”
