Farmers look to storage options that iron out

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News article

Farmers look at storage options that iron out price volatility

November 2010

rural consultancy news

Buoyed by higher prices and strong consumer demand, UK growers are looking to invest in better storage, but at the same time seeking marketing vehicles that minimise the effects of price volatility.

That’s the conclusion of market experts manning the GrainStorm discussion area at last Wednesday’s (Nov 3rd) UK Grain Event held at Peterborough.

According to Jack Watts, senior analyst at the HGCA, growers were keen to get a handle on the factors influencing prices and the prospects going forward.

“Most had a really good handle on benchmark profits for their operations, but now, in reaction to a couple of volatile seasons, were looking at the best strategies to maximise returns.

“If anything, the trend was that a move away from spot sales towards pools and tactical marketing packages that sold grain based on trigger prices and options. 

“Some were looking to long term contracts as a way of minimising risks, particularly in the malting barley and milling wheat sector. 

“Growers also recognised that they needed to spend more time on marketing and pricing their grain, tracking developments and making themselves more aware of market drivers,” confirmed Mr Watts.

Openfield farm service manager, Chris Spratt, said that most enquiries he received on the GrainStorm desk were on specific marketing options.

“Growers were looking at the range of contracts and pool options available, asking about ways of locking themselves into added-value markets with strong consumer demand,” he says.

“They were more philosophical about recent volatility – having lived through a similar period of price fluctuation in 2007 – and looking at ways to use the forward market to best advantage.

“There was also growing interest in central storage options, particularly on local expansion plans at both Woldgrain and Camgrain through Kettering and its Cambs sites.”

David Kinnersley of Fisher German, confirmed that 70-80% of farmer questions he fielded focused on the key decision as to whether to invest in central storage or new builds on farm.

“There was no doubting the need for investment in better storage,” he said.  “The key question was, based upon my size and scale of operation, which storage route was best for me?”

“Particularly smaller 300-400 acre enterprises with out-dated storage were sensibly considering co-operative central stores but were concerned about investing off farm and harvest logistics.

 These farmers recognised that there was little point in investing unless their son/daughter came back onto the farm, but that equally, smaller operations couldn’t cope with larger combine outputs if a contractor got involved.

However others that had the scale were weighing up both storage options, with on-farm storage questions focusing on the pros and cons of on floor and continuous flow driers.

“Above all, growers were increasingly recognising that they can’t trade on hindsight feeling that if they have made a decision you then have to move on,” said Mr Watts.

UK Grain which was organised by Fusion Events saw 1200 farmers attend the event at the East of England Showground, up 500 on the previous year’s figure.  Next year’s event will be at Peterborough on 2nd November.

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