Arable farming - excitement or apprehension?
As an arable farmer, selling what I produce has always bought mixed feelings to me.
Blog written by Andrew Huxham, co-founder of Graindex
"I’ve always tried to look beyond my emotions, digest the available news or data and make informed risk-averse decisions. I always sell some forward and when I do, I usually tell myself, “if that’s the worst trade of the year we’ll be ok”.
I started wheat harvest ‘22 marketing in October ‘21 at £188.00/t base, with a min £25.00/t no max premium for milling group 1 spec. I was amazed at the time that we were looking at the third consecutive harvest of wheat sales in excess of £200.00/t. This is despite increasing global consumption and a relatively tight balance sheet, we’ve seen £200.00/t before and it fell just as quickly as it rose. The world has changed significantly since then and parts of the global food supply chain are looking very fragile.
Today, my position is 30% sold on new crop wheat, with the last trade at £238.00/t base. I don’t know if I’m excited, fearful or just apprehensive about the coming harvest and the 2023 harvest. I can sell forward, at a good price and with a margin and while there are bullish stories everywhere, I believe most of these are factored into the market already. However, I’ve just sold the last of harvest ‘21 at £340.00/t which makes the new crop look cheap. Despite what many people think about farmers, it’s not greed that stops me from increasing my harvest ‘22 sales, but fear that if it doesn’t rain soon, the 30% sold could become 50% or worse.
One thing that I do believe is that market forces will prevail, this is true for all commodities and inputs. The price of fertiliser [assuming supply is ok] will result in less demand. We have cut back nitrogen by 15% to try and carry some stock over to the next harvest. Some will be making much larger reductions, especially where finance is expensive or unavailable. The pulse area is certain to increase in a bid to produce some homegrown nitrogen. The reduction in fertiliser usage will result in a smaller global harvest, regardless of weather and other factors. However, many livestock sectors are un-viable at the current feed prices. Therefore there will be less stock to feed in twelve months as people reduce numbers or leave the sectors completely.
So this leaves me with the conundrum. I can sell the new crop at a good margin but with reducing BPS and huge triple-figure inflation on input prices, I’m going to need to bank some cash to see me through the following couple of harvests where margins could be tight. I expect I’ll continue with little and often, using Graindex to ensure I get the best deal on the day. I also make a note by each trade, detailing why I sold when I did, so I don’t look back with regrets.
It’s easy to talk up individual trades, but all that really matters is the average price at the end of the season. I have my target and if I meet or exceed it, it’s been a successful year."