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Croptec 2016: Farmers told to plan ahead as grain markets become more volatile

Arable farmers were told to review their core costs as markets become more volatile


Alex   Black

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Alex   Black
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Farmers told to plan ahead as grain markets become more volatile #Croptec2016

Marketing is more important than yields as grain markets become more volatile, according to Rupert Somerscales, consultant at ODA.

 

Speaking at Croptec 2016, he warned farmers were now at more risk of volatility than ’at any time in the past 40 years’.

 

"Farmers would spend 95 per cent of their time looking at yields but the price you achieve per hectare is more important," he said.

 

"The market is telling you a story."

 

As part of a risk management strategy, he said farmers should be aware of what price they need to be profitable, the degree of risk and the best contract to be on at the best time.

 

Mr Somerscales also highlighted the importance of knowing when to put grain into storage.

 

"Grain is dumped on the market in one part of the year. But demand is linear.

 

"Millers want a little bit of wheat throughout the year."

 

Core costs

 

Jamie Mayhew, farm business consultant, at Andersons farm business consultants also advised businesses to focus on what they need to be selling at by reviewing their core costs.

 

"The gap between the best and the worst is getting wider," he said.

 

"It is trying to reduce costs, whether that is stretching machines one more year or forward fixing fuel costs."

 

He also said many farmers have failed to take rent and finance costs into account which may be particularly affected if interest rates increase.

 

Andersons also highlighted the risk of a hard Brexit on soft wheat markets as the current World Trade Organisation tariffs for soft wheat into the EU were €95/t (£80/t).

 

Size matters

 

Size may also be an important factor in farm profitability, according to Strutt and Parker associate Robert Gazely.

 

Strutt and Parker’s harvest yield results found farms above 1,000ha averaged 9.1t/ha compared with 8.9t/ha for farms below 1,000ha.

 

But Mr Gazely, associate at Strutt and Parker, said: "It cannot be considered in isolation and must be considered with a plethora of other information."

 

Bigger farms tend to have similar yields to smaller farms but are more profitable with lower machinery and variable costs.

 

However, Mr Gazely suggested soil type had a greater effect than size of farm.


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