Bon prix through market strategy
Physiocrats were a group of progressive 18th-century French economists. They chiefly believed that the wealth of nations derived solely from the value of agriculture, and that government policy should not interfere with the operation of natural economic law. They praised natural order and celebrated farmers.
François Quesnay was the original writer behind Physiocracy. Though not a household name in economic terms like Adam Smith or David Ricardo, he is, however, recognised for creating the first strictly scientific system of economics.
The economic coordination of grain production and consumption is a complex story. Amplified by the boom of international grain trade from the 1970s onwards and more recently the Russia-Ukraine war, adding a wave of geopolitical considerations into the mix. This has led to a more vulnerable position for UK farmers as global push and pull factors hold greater influence over domestic market values. Mitigating this risk requires a clear market strategy.
What are your needs and how can they be matched to the market environment?
I manage the grain sales on my family farm based in Herefordshire run by my father, Peter, and brother, Edward. It’s a 400ha arable farm, a few organic apple orchards, a glamping site, a PYO pumpkin patch, and too many sheep for my liking!
With good on farm storage facilities, we have the option to be long holders, but start grain movements from November onwards to manage cash flow. When selling grain, my strategy at its core is based on answering three key questions:
Is the market on a rally?
Is the market value at or over my margin aspiration?
Will a trade today increase my crop year average?
If the answer to all three is yes, I’m a seller.
Of course, like any [self-proclaimed] proficient gambler I sometimes think “but if I hold it might go up more”. But I aim to sell when I want to, not when I have to.
An essential tool to avoid selling under pressure is setting Target Prices. By setting realistic targets and buffers based on margin aspiration and then factoring in market volatility, I can go back to the three questions above to aid the decision-making process. This Target Pricing tool is one of the benefits of being a Graindex Premium Member. To start setting your target prices and buffers click here.
There is no guaranteed playbook as every crop year presents a different grain market economy. Applying sound trading principles bolstered by Graindex trading tools will enhance profitability. Maybe those Physiocrats of old were onto something after all?
Victoria Godsall
Graindex Business Development Manager