Raising crop values with professional marketing

One of Britain’s biggest farming companies is so convinced it pays to leave grain marketing to the professionals, it has renewed an agreement with a co-op to do just that.

Velcourt has reappointed Centaur Grain as sole seller of most of its 235,000t of combinable crops for a further three years.

The decision, said Velcourt farms director, Brian Redrup, reflected the success of the project over the past six seasons.

The agreement offered a transparent, dedicated marketing arm for Velcourt, allowing the firm to make the most of crops sold, while minimising risk, he added.

“As intervention support fell away in the late 1990s, it became clear how global market forces, and the ensuing volatility, would influence the price of UK grain.

Velcourt needed a dedicated, professional approach to grain marketing.

“There was a choice between selling to grain merchants, which have shareholders to keep satisfied, or working with a grain co-operative,” Mr Redrup said.

Centaur Grain, which markets over 1.7m tonnes of combinable crops a year, handles Velcourt’s output through its subsidiary, Combined Arable Services.

“Velcourt’s executive management meets Centaur regularly to determine the strategy for marketing combinable crops.

The objective is to maximise the value of commodities while taking a responsible attitude to managing risk,” Mr Redrup said.

Good communication was central to the success of the venture, he said.

“As soon as budgets are prepared, every Velcourt manager will brief Centaur staff on the varieties planted and forecasted yields, so we can try to balance what each farm can grow with appropriate market outlets.”

Matching farmer and co-op needs helped add value to both operations, said Richard Jenner, Centaur’s marketing manager.

“We know exactly how much of what crop is on which farm and its quality, helping to keep rejection rates and deductions as low as possible.

We can maximise returns for our client.

“We are clear what Velcourt’s budgetary aspirations are.

Knowing the break-even boundary, we can start to build a marketing plan based on where we judge the market to be heading.”

In return, the co-op receives a flat-rate commission for every tonne of Velcourt grain sold.

Bespoke computer software allows Centaur to run a “virtual warehouse” of Velcourt grain.

“A dedicated haulage manager allows us to empty Velcourt farms entirely, rather than having lorries visiting stores again and again,” Mr Jenner said.

To manage the risk of market volatility, fixed-price contracts are sought where possible, such as a milling wheat deal with Warburtons and other agreements for pulses.

“But we often use futures contracts as a hedge and options where appropriate.”

The contract put crop marketing in the hands of professionals, but the relationship meant it was almost an extension of the farm office, said Mr Redrup.

“This allows our farm managers, as growers, to concentrate on what they do best.”