Forward to market

Selling grain forward makes sense – even though you might not get the best price, says Fen Tiger

Forward selling grain is always a contentious subject. Some growers still see it as a massive gamble. They are afraid of losing out if prices rise after their decision to sell. But others see it as a way of managing risk and evening out price fluctuations.

If you look at the figures, history shows us that selling at harvest generally means selling at the lowest prices –  apart from in years with significant weather problems, such as excessive rainfall or drought as happened in 2018.

Plentiful supply

Why? Because a plentiful supply of grain in turn forces prices down. Alongside this, a bumper harvest puts grain handling and storage capacity under pressure. Usually, this means it is a buyer’s market rather than a seller’s.

So forward selling appears to be a positive step in balancing sales across the year. What is critical is the farmer’s ability to know their cost of production – which enables the grower to know the precise point at which to trigger any forward selling profitably.

It was always my policy to assess the potential crop in the ground, estimate the likely yield and then sell a small proportion of that crop at harvest.

Depending on the yield, most years I had adequate storage, although it required extra work during July and August to lay the grain ducts and monitor the stored crop.

Straight loader

It was far easier to do away with any augers and elevators and simply tip the grain direct on the shed floor and then load straight into a waiting lorry.

I felt safe in the knowledge that I had well under-estimated the potential farm yield and took a standard 3t/acre level. This allowed me to sell 20-25% of the crop forward with some confidence, avoiding any sleepless nights by avoiding any over-selling.

It always seemed to work out well on tonnage and price. And I always felt the right decision had been made. I never achieved the best price but having committed the tonnage, I was always happy with the price agreed.

Sometimes I waited in vain for that magical £150/t price to arrive. Refusing to sell at a pound or two lower, I would then regret it all harvest. But in all, the whole system worked for me, rather than against.

Good advice

It wasn’t just wheat I sold forward. Some good advice given to me by a grain merchant when selling linseed was to sell on an acreage basis rather than a fixed tonnage. With linseed, yields were often highly unpredictable and it was good advice indeed.

I tried to sell grain the same time every year: harvest, January, February and then June. Farm work was less demanding at those times and chopping and changing selling patterns never worked for me.

So I wonder whether it is time to consider some forward selling grain from this coming harvest? After all, prices may move downwards rapidly if Mr Putin decides to call it a day in Ukraine or the grain shipping agreements are finally sorted out.

This will leave growers with high input costs but much lower than expected output prices. And with those prices currently north of £200/t, surely its time to sell a small percentage and at least cover some of your growing costs.

It’s a lottery and anybody’s guess, so good luck and all the best for 2023.