By FW staff
WITH a quarter of arable farmers operating at or below break-even point, more effective grain selling is vital to combat lower incomes, says Home-Grown Cereals Authority economist Peter King.
Too many growers still try to sell at the top of the market, but few actually succeed. This season has already shown marked volatility; since harvest, wheat prices have risen by £10/t. “That is worth £35/acre.”
A better method is to minimise risk by spreading tonnage across different contract types, says Mr King. He suggests locking 40% of grain into a forward fixed price contract.
A further 40% should also be sold forward, using options. For a small premium, these allow the farmer to take advantage of price rises, but guard against falls. The rest can be sold spot.
“Using this 40:40:20 system, if the price rises, the farmer still can gain on 60% of his grain. If values fall, 80% will achieve the better price. It is not the extra 50p/t on the day which makes profits Ñ it is the average you make over the whole season.”