Record interest in red diesel forward purchasing scheme
An initiative which enables members of the AtlasFram Group farmers’ cooperative to forward-purchase red diesel (gas oil) for delivery during the harvest period is attracting record interest.
Commitment to the scheme, which allows members to order a specific volume of fuel, at a specific price for guaranteed delivery in July, August and September, has increased fourfold during the last 12 months, from 800,000 litres in 2012 to 3,200,000 litres in 2013.
“We launched the initiative to ensure that our members could avoid being at the mercy of prevailing ‘spot’ market prices at a critical time of the year when they use the most fuel and must have secure supplies,” states Abbie Lyon, Fuel Buyer for the AtlasFram Group, which purchases 45 million litres annually on behalf of its 1250 members throughout the UK.
“Those who participated last year saved almost 10% on the cost of their red diesel, around 6 pence per litre because after we fixed the price at 63.79ppl the ‘spot’ market subsequently rose above 70ppl. This year, oil prices have remained strong, partly due to the ongoing political unrest in Egypt, and may go higher. However, our participating members have the security of knowing that they have a fixed price for their fuel, which will be supplied through two of the UK’s leading fuel distributors.
“Farmers have very few opportunities to purchase fuel on a forward, fixed-price basis because farmers’ cooperatives generally do not have sufficient commitment to enable them to offer this facility without being exposed to significant financial risks. The exceptionally high level of commitment from AtlasFram members, combined with the Group’s very secure financial position and guarantee of payment to suppliers enables us to negotiate very competitive prices and provide this very valuable service.
“We believe that the initiative will be particularly valuable this year because of the late start to the harvest, which will further increase pressure on fuel distributors during an already very busy time when prices normally tend to rise because of strong demand from the agricultural sector. Participating members benefit from a significant financial saving, so we believe that this will become an even more popular way to obtain fuel in the future.
Richard Anscombe, CEO of AtlasFram Group, adds: “AtlasFram members rely on us to provide them with totally-impartial advice, save them money on farm inputs and reduce their administrative burden. Markets for all key farm inputs and outputs are increasingly volatile, so the timing of purchases and sales are critical to members’ profitability.
"It is fundamental to the value that AtlasFram adds to our members' farming enterprises that we innovate to help mitigate their risk. Earlier in the year Andrew Merton, who manages our Fertiliser purchasing and strategy, lead the creation and introduction of a Fertiliser Pool, the first risk management service of its kind in the UK Market. I am delighted that Abbie's hard work and creativity in building the forward buying of fuel commitment so effectively has added another very significant risk management service to the membership services that we provide."