As I stare bitterly at the considerable mound of wheat gathering in my grain store I am left to contemplate what might have been.
If only I’d sold the crop forward last autumn before I’d planted up it would have been worth £60 per tonne more than the insulting £105 I am currently being offered for August collection, September payment.
At such times as these, some clever dick can always be relied upon to remind you what an idiot you were not have done more forward selling. Step forward Jeremy Cole, managing director of independent grain advice service Agricole, who tells us that this season’s catastrophic falls in grain prices are a wake up call for the industry and more needs to be done to aid farmers on the grain marketing front. Mr Cole helpfully reminds us that “Grain can be sold up to two years ahead so people can sell the crop up to November 2016. You cannot just sit around on a failing market doing nothing.”
The point he’s making is that, as farmers, we should be more interested in ideas like contracting to sell a crop before we sow it. Presumably if the price is not high enough we shouldn’t sow the crop in the first place.
But farming doesn’t work like that – farmers cannot simply refuse to sow if spot or forward prices are low – so we are all drawn into sowing crops on a speculative basis and hoping that the price will improve at some point between drilling the crop and selling it. With arable farming, this involves a considerable time frame. Crops that we are planning to sell this autumn need not be sold until July 2017. So most of us just cross our fingers and plant up on the basis that there will probably be some sort of rally in commodity prices between planting and an eventual sale.
What Mr Cole fails to mention, though, is the agony farmers suffer when they do sell forward but then get caught out by a strong rise in prices between agreeing a contract and delivering the grain. This, of course, can be doubly uncomfortable for farmers if, after an unfavourable growing season, they fail to harvest sufficient tonnage to meet their contracts. Sadly this scenario often occurs when there is a general shortage of crop nationwide. The merchant can then exercise the right to buy against the farmer in the market to fill the contract and then send the farmer the bill – given that prices are by then sky high, this is invariably a ruinous experience for the farmer.
Perhaps that is why so many of us prefer to have the physical tonnage in store before we sell anything. It may be, Mr Cole, that such caution leads many of us to sell at low prices but the fact is that farming is a risky business whichever way we choose to sell our produce.