Farmers are placing more emphasis on managing price risk.
UK farmers are now starting to follow farmers around the world in countries such as the US, Australia and Europe, where for decades far more emphasis has been placed on managing price risk within businesses and as much focus is placed on marketing the crop as it is growing it. After all, with average wheat yield variation at 7% and price variation at 46% the requirement to manage both is clear.
Following a visit to Ukraine where CRM Agri work with a number of businesses, CRM director James Bolesworth commented: “I was impressed at the high level of technical and market knowledge held by a region which, until recently, didn’t even have a wheat futures contract to hedge against”.
With increasing price volatility, more emphasis is being placed on the importance of having a strategy and a marketing plan that accounts for market opinion, seasonality, basis opportunities, target prices and a box of tools that can be used in different situations, selling decisions should be made based on robust analysis of market fundamentals and of course the constraints of each business . James says: “Timing is also important, as well as appreciating that the cash flow and storage of each farm business in order to avoid selling under pressure, rather than when an opportunity is seen. Some businesses do not focus enough resources to managing the most volatile variable for their businesses bottom line, price, but this is changing”.
The independence of the insight delivered by CRM is crucial to ensure a fully transparent picture of the market is presented as well as a strategy which seeks the best opportunities based on rigorous analysis, many farmers are now adopting this approach as well as end users as they come to realise the difference which being below or above the market averages can have to their bottom lines.
Amongst the farming enterprises adopting CRM Agri-Commodities’ independent approach to grain marketing is JSR Farms Ltd, a 10,000 acre farming enterprise near Driffield, Yorkshire and one of the largest farming operations in the UK. Director Tim Rymer said: “CRM Agri have provided flexible training solutions for our business, tailoring a course that has educated our team in all aspects of grain marketing and resulting in a business that is better equipped to adopt and identify strategic opportunities while also reacting more effectively to market unpredictability.”