Norfolk farmers must take responsibility for knowing their markets, says Dewing Grain boss
PUBLISHED: 16:25 13 December 2017 | UPDATED: 16:25 13 December 2017
Cereal farmers must improve their ‘attitude to education’ and take more control over how their grain is traded if they want to succeed in a volatile market.
That was one of the messages from a business seminar held in Norwich to equip East Anglian growers with insight into how commodities, futures and foreign exchange markets can influence the price paid for their crops.
The “Behind the Hedge” trade education day at the Maids Head Hotel was organised by Aylsham-based merchant Dewing Grain, with speakers including a futures broker, a foreign exchange trader, a contracts arbitrator and an international commodity broker.
Guests were told that only by being better informed could they ensure they are growing the right crops to meet market demand, and understand any risk involved in the pursuit of a premium price.
Dewing Grain chief executive Andrew Dewing said: “You are going to have a tough time in the next few years, and understanding how your grain trader works can be the difference between making a profit and making a loss. It is your attitude to education that will make the difference.
“For those who have chosen not to be here today, there seems to be an attitude of: ‘If it is not free, then I won’t bother’. I am really worried about that attitude.
“You need to be responsible for the effort to understand the market. When someone says ‘grow this’ you need to know what their incentive is, and if you will get the premium for that – or whether you should be doing something else.
“Understanding all of this information does take a bit of effort. But all of these points being made are here to put you in a stronger position. If someone comes up to your farm and offers you a certain price for your wheat, then it is up to you to know where it is going. You have to be the person in control.”
Mr Dewing said while the proximity of major processors made malting barley and feed wheat sensible options in East Anglia, growers trying to achieve higher premiums by growing milling-quality wheat needed to understand the risks.
“Whenever you ask about the most important thing when you sell grain, most people say ‘price’,” he said. “But if you’re taking it to a mill in Manchester the haulage might be £18 (per tonne) and who is responsible for that cost if the load is rejected? It is you. So the extra price you wanted could be lost many times over in one lorry load. You need to be aware, and you need to stipulate where that grain is going.”
Other speakers included James Webster, an arable market analyst at the Agriculture and Horticulture Development Board (AHDB), who explained the influence of countries like Russia on the global supply and demand for grain.
“Russia is a key driver of production at the moment,” he said. “That’s a challenge, because their growth is yield-driven, so all it takes is a bit of yield volatility and it can drop back down again. If they don’t have enough snow, their crops won’t be insulated against the low temperatures they get there.
“It is a significant crop, so if there is a problem in Russia it will be a problem for the market itself.”
Meanwhile, Doug Challis, a foreign exchange trader with Santander, used the astronomical rise of Bitcoin as an example of the irrational nature of investment markets.
For the sterling-to-Euro exchange rate, which has a major effect on farm support payments and export prices, he said the bank’s analysts predicted the current figure of 1.15 is likely to fall back to around 1.04 by the end of next year “as Brexit negotiations dominate proceedings” – which could be good news for exporters.