Farmers must be market-savvy to sell their first post-Brexit crops, says Norfolk grain trader
PUBLISHED: 13:03 17 August 2018 | UPDATED: 13:03 17 August 2018
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As East Anglian farmers prepare to plant the first crop to be harvested after Brexit, they have been urged to pay closer attention to the markets which will govern their future prices and profits.
The dry, hot summer has hit cereal yields by up to 15-20pc for some farmers this year, but pushed prices up by 40pc – indicating both the volatility in the market, and the importance of selling commodities at the right time.
Andrew Dewing, chief executive of Aylsham-based grain merchant Dewing Grain, said growers need to equip themselves with the knowledge and the tools to make the right decisions for their 2019 crop.
Mr Dewing is also preparing to launch a new weekly podcast later this month, aimed at demystifying the process of grain trading for Norfolk and Suffolk farmers.
“Moving into a post-Brexit world, the key message is to understand what is driving the market,” he said. “Don’t just wait until it moves and then react.
“For example, when the heatwave was forecast to go on for four weeks, farmers knew that prices would go up. Instead of kicking the dog and moaning because they had sold early at a lower price, they should have done something about it.
“If you had the knowledge to cash settle, or buy some futures in something else to trade off against it, you will have captured a lot of this recent rally.
“That education is available for free, but farmers are still moaning. They said they sold it early, and ‘woe is me’. But the options were available to them, if they didn’t use them, it is their fault. There is no excuse.
“Before, farmers never needed to think like this. But they need to be responsible for their own destiny now.”
Mr Dewing said the Brexit negotiations offered another opportunity to assess the likely direction of the wheat market, and whether the guaranteed prices being offered for next season’s crop are a profitable gamble, even if they are £20 per tonne lower than the current post-drought prices.
“We have got the possibility of a no-deal Brexit,” he said. “That would mean we need to have tariffs at 12 Euros per tonne to supply into Europe, where we are competing with Russia and other parts of the world. We are constantly hearing on the news that no-deal is accepted as the probable outcome, and what do you think that will do to your prices? Here you sit as a farmer with that threat staring you in the face. And yet you are still not selling.”
ACCESSING MARKET INTELLIGENCE
David Eudall, market intelligence partnership manager for the Agriculture and Horticulture Development Board (AHDB), said understanding market information must be a starting point for any farm business.
“From an arable point of view it is about understanding what your cost of production is, and what is a profitable price for you,” he said. “Likewise, for poultry and pigs, it is about understanding your selling prices and how it relates to your feed costs.
“Discuss with your feed compounder and your grain merchant what the different options and strategies are. It is frustrating because these tools are there for people to use but there is a lack of understanding and a lack of confidence where people don’t use them enough.
“As we move into that Brexit world where we are opened up, these tools will become more important because the volatility might be driven by factors which we have not experienced before because we have been under the protection of the EU. Awareness is what it is all about.”
Mr Eudall said while some farmers had struggled more than others with the summer drought, overall yields were down by about 10pc across the country – much less than was feared 4-6 weeks ago.
Jack Watts, chief combinable crops advisor for the NFU, said: “It has been a year that demonstrates the resilience of our farming system in this part of the world. The crops have come through really well, which comes down to the fact that you have really good soils here in the east.
“Politically, it is really important. This was the last harvest before Brexit, and farming is hugely dependant on policy, so politicians need to recognise the resilience in our soils, but also that if it is not maximised with resilience in our policy, we will struggle.”