Arable farmers and members of the industry from Somerset discussed grain marketing tactics and benchmarking at a recent HGCA Monitor Farm meeting.
This was the second in the series of HGCA’s Monitor Farm meetings hosted by Rob Addicott in Stratton-on-the-Fosse.
Philip Dolbear, HGCA Regional Manager, said: “Rob will be sharing his business; his business successes, disappointments and issues over the three-year programme. At regular meetings throughout the year, we will be challenging each other to improve performance and the management of our businesses.”
Rob Addicott set the scene with an update from his own farm. He has suffered more pigeon damage than last year, but with crops more forward, it is not considered detrimental to yield potential at this stage. A recent ‘big development’ has been the purchase of a new auto-steer combine with his machinery partner, Jeremy Padfield.
HGCA’s benchmarking tool CropBench+ revealed total costs of production before rent and finance at Rob’s farm for 2014 first wheats are over £120/t and for second wheats, over £140/t, giving him an average of at least £130/t.
“This year I didn’t manage to sell for more than £130/t. I usually just about break even on all my crops. Does that worry anyone? How can we build for the future when sometimes we’re making a loss on crops?” Rob said. Rob’s objective through the Monitor Farm programme is to achieve more consistency and certainty from his grain marketing policy to give confidence for longer term investment plans.
Rob Addicott is a Duchy of Cornwall tenant farming 265ha in Somerset, divided between his home farm, shared land with a neighbour, and contracted land. The farm grows winter wheat, barley, OSR and beans for human consumption on a six-year rotation. Rob shares all of his machinery with a neighbour. He measures all his crop performance against a Somerset benchmarking group. Rob also manages an on-farm office complex together with his father.
Benchmarking
Farmers were encouraged to identify, compare and manage their costs of production by joining the Monitor Farm benchmarking group
HGCA’s Regional Officer David Pett gave a presentation on CropBench+, which Rob Addicott and many other Monitor Farmers around the country are now using. Using the web-based tool, costs of production can be compared anonymously by participating farmers.
Rob added: “I didn’t find it too hard to use CropBench+, and it just took me about three hours to upload all of my data. If other people struggle to upload their data themselves, it’s good that HGCA has a data collection service to help.”
Market psychology
The meeting concluded with a discussion on grain marketing led by AHDB/HGCA analysts Jack Watts and Anna Lockwood. All farmers present were challenged to consider their marketing strategies.
Jack Watts said: “There’s a lot of psychology related to marketing your grain. You might often talk about when to sell, but do you ask how?”
Rob Addicott explained his marketing strategy to the meeting He said: “My granddad used the ‘three thirds’ strategy, and I still use that, although I like to know what it’s cost me to grow before I sell. I use average yields. By May I’ve applied most treatments I need, so then I have an idea of the minimum price I want. However, last year I never reached the price I thought I wanted.
“I also need to make sure I have enough cash flow, so some of the crop needs to go early on, when the price tends not to be so good.
“I do try to follow the markets in order to make informed selling decisions, but a lot of the time my focus is elsewhere. However, I typically trade with three or four different merchants, so I have a good breadth of contacts.”
Jack Watts spoke about the timing of grain marketing, emphasising that there should be three crops in mind at any one time, because the window of marketing opportunities is 36 months long – even if just for budgeting perspective.
Yield risk was seen as a psychological barrier to grain marketing; however, compared with other global wheat areas such as Kansas, the South West has relatively stable yields. Farmers were urged to know their five-year averages – a good indicator of the relative stability.
Jack gave an introduction to the futures market, although farmers should be cautious about using these markets themselves, rather trading through a merchant instead.
He added: “You should quiz your merchants on what they can offer in terms of minimum price contracts. Find out what’s available outside the traditional fixed price deals.”
The meeting finished with the launch of a grain marketing challenge. In a virtual selling situation, members of the Monitor Farm group were given Rob’s 2014 tonnage and predicted 2015/2016 crops to market, offering farmers a safe environment in which to test alternative marketing techniques.
The next meeting at HGCA’s Bath Monitor Farm is on 26 March 2015, where the topic will be weed control.
