Risk spreading puts a lot more grain in Banks pool
By Philip Clarke
ALMOST one third (300,000t) of the grain expected to be traded by Banks Agriculture next season has already been committed to the companys pools.
That represents a three-fold rise on 1996, as farmers look for ways of spreading their risk after a season of extreme volatility, says wheat director, Richard Whitlock.
Banks is now into its fifth year of pooling, offering contracts for four marketing periods: Harvest- September, October-December, January-March and April-June.
The first two pools have already paid out £106.12/t and £107.23/t to members, (net of haulage and a £2/t marketing fee, and subject to quality and location allowances), and Mr Whitlock anticipates values for the last two pools of about £108/t and £110/t, respectively.
"This follows a nine-month bear run and the prices we have been returning to farmers have been way in excess of what they would have got if they had kept their grain to sell spot." Indeed, all the grain in all four pools had been sold by the end of October as the company cleared its books before the firming of sterling and record harvest really savaged the market.
But, says Mr Whitlock, this performance was no better than in previous seasons when, even though spot values were higher on the day payments went out, across the whole season the pool price still eclipsed the average. "This years experience is only better in terms of perception," he says.
Despite the fact Banks has considerably more grain committed to its pools for next season, so far it has only traded about 2% compared with nearer 20% this time last year. "Certainly there is the potential for another big UK crop – 16m tonnes plus at average yields – maintaining pressure on prices. But several factors could turn things around," says Mr Whitlock.
One of these is the lack of subsoil moisture in East Anglia, which could lead to below average yields. The current season also looks like closing on a tighter note than expected, due to strong wheat demand from compounders reducing the extent of any carry-over.
Further afield, world stocks are still at historically low levels and US winter wheat plantings are down 7%. "We believe we are near the low of the current price cycle and near the high of the currency cycle. There is no reason for anyone to sell yet."
• Other merchants report a similar increased uptake of their risk management schemes. Cargills managed grain fund now has about 250,000t committed for its second season and is expected to account for 20% of the firms trade. Dalgety also reports a 50% rise in its various group and fund schemes. *