2016/17 milling wheat premiums

[crazy_bull]

Ok here's a question

If I have 500t on a min £20 with a merchant and spot premium is £13 can I ask to tear up contract to supply and write me a cheque for £3500?

My take on them is that they are not defaultable if the farmer fails to get the quality. i.e; the farmer has feed wheat (failed milling) and the market has gone up to £40 (the farmer won't get sent a bill for the difference) so why should they be defaultable the other way round?

C B

 

[shakerator]

My take on them is that they are not defaultable if the farmer fails to get the quality. i.e; the farmer has feed wheat (failed milling) and the market has gone up to £40 (the farmer won't get sent a bill for the difference) so why should they be defaultable the other way round?

C B

They are MIN 20 no upper cap so that doesn't make sense

 

[Grain Buyer]

I would have to side with CB on this one.....they are non-defaultable growing contracts which work both ways. Grains Guru, with your willingness to pay out against this contract what's to stop a farmer doing 5000t every year, and simply cash settling in the years it suits him, whilst tearing up contracts in years when it goes against?

Shakerator- CB makes perfect sense, he's simply implying a farmer won't get defaulted on failing to make the grade.

 

[shakerator]

I would have to side with CB on this one.....they are non-defaultable growing contracts which work both ways. Grains Guru, with your willingness to pay out against this contract what's to stop a farmer doing 5000t every year, and simply cash settling in the years it suits him, whilst tearing up contracts in years when it goes against?

Shakerator- CB makes perfect sense, he's simply implying a farmer won't get defaulted on failing to make the grade.

How can it go against with a min 20 ?

 

[Grain Buyer]

is he not implying......if the prem is 40 and the farmer only has feed, then the merchant won't default him?

anyway, once again we have farmers moaning about the merchants they deal with. Why do you deal with people you don't trust and have a good working relationship with?

 

[crazy_bull]

How can it go against with a min 20 ?

You wouldn't get defaulted for not coming up with the goods.

C B

 

[Grains Guru]

I would have to side with CB on this one.....they are non-defaultable growing contracts which work both ways. Grains Guru, with your willingness to pay out against this contract what's to stop a farmer doing 5000t every year, and simply cash settling in the years it suits him, whilst tearing up contracts in years when it goes against?

Shakerator- CB makes perfect sense, he's simply implying a farmer won't get defaulted on failing to make the grade.

Nothing to stop growers doing this GB.

This is why they are such good contracts for growers. The grower locks into the min premium or cash settles them in the good year's and can walk away from them in the bad year's.

If you've made a contract for 50t or 5000t you live and die on the terms of the deal. It's the merchant that contracts as 'non defaultable' so the buyer / merchant gives the grower the option of walking away in a high priced 'tough' quality year and yet has to take the goods at the minimum in the good quality, low premium year's.

What is to stop the grower buying in goods to fulfill these deals? Nothing. As long as they meet the contract 'spec' and you can pick them up at the contracted pick up point all is well. So how can you stop a grower from buying back his premium when he or she has a profit in it? I'd suggest you'd be on a sticky wicket trying to stop that one.

I suspect this is what some in the trade are only just starting to realise...

 

[Condi]

Nothing to stop growers doing this GB.

This is why they are such good contracts for growers. The grower locks into the min premium or cash settles them in the good year's and can walk away from them in the bad year's.

If you've made a contract for 50t or 5000t you live and die on the terms of the deal. It's the merchant that contracts as 'non defaultable' so the buyer / merchant gives the grower the option of walking away in a high priced 'tough' quality year and yet has to take the goods at the minimum in the good quality, low premium year's.

What is to stop the grower buying in goods to fulfill these deals? Nothing. As long as they meet the contract 'spec' and you can pick them up at the contracted pick up point all is well. So how can you stop a grower from buying back his premium when he or she has a profit in it? I'd suggest you'd be on a sticky wicket trying to stop that one.

I suspect this is what some in the trade are only just starting to realise...

Yet again, we disagree. The ones Ive seen are NOT non defaultable, they are usually 'subject to quality', which is a very different thing. If the quality is poor, then the grower is either obliged to supply feed wheat or can occasionally walk away, but if the quality is high the grower is obliged to supply the milling wheat as agreed. Quite often the tonnage is + min 20, so the grower has actually sold feed wheat anyway.

What merchant in their right mind would effectively grant the farmer a free option on milling premiums which they can just walk away from whenever they wanted?! Nobody, or at least not anybody who actually wants to remain in business.

There is nothing wrong with a farmer buying in the grain and the merchant collecting it, but that is very different to cashing out, and certainly different to making it a non defaultable contract which they can just walk from.

Grains 'Guru' - have you every actually traded? If so, how the hell do you make any money? Assuming you are still in business, I would tell everyone on the forum who you work for - you must be a great merchant to deal with. I would recommend all farmers deal with you...


Does the fact that every other merchant on here disagrees with you not suggest that the one who is wrong is you?

 

[Clive]

Nothing to stop growers doing this GB.

This is why they are such good contracts for growers. The grower locks into the min premium or cash settles them in the good year's and can walk away from them in the bad year's.

If you've made a contract for 50t or 5000t you live and die on the terms of the deal. It's the merchant that contracts as 'non defaultable' so the buyer / merchant gives the grower the option of walking away in a high priced 'tough' quality year and yet has to take the goods at the minimum in the good quality, low premium year's.

What is to stop the grower buying in goods to fulfill these deals? Nothing. As long as they meet the contract 'spec' and you can pick them up at the contracted pick up point all is well. So how can you stop a grower from buying back his premium when he or she has a profit in it? I'd suggest you'd be on a sticky wicket trying to stop that one.

I suspect this is what some in the trade are only just starting to realise...

i guess what stops a farmer doing as you suggest is the desire to do future business with that merchant - yes you could make a few £ while you move around the few large merchants but what happens 5 years down the line when you have run out of people who will deal with you ? where do you sell your grain then ?

 

[Condi]

Grains 'Guru' - have you every actually traded? If so, how the hell do you make any money? Assuming you are still in business, I would tell everyone on the forum who you work for - you must be a great merchant to deal with. I would recommend all farmers deal with you...


Does the fact that every other merchant on here disagrees with you not suggest that the one who is wrong is you?

@Grains Guru ..... ?

 

[Grains Guru]

No. Never. I have not got a clue about trading so I guess we are on a level footing... I can spell though...

 

[Condi]

Would explain why you type so much (correctly spelt) rubbish and then have the arrogance to call yourself a guru.

 

[Oilseed and Pulse Trader]

Would explain why you type so much (correctly spelt) rubbish and then have the arrogance to call yourself a guru.

Who do you trade for?

 

[Farmer Miggins]

No. Never. I have not got a clue about trading so I guess we are on a level footing... I can spell though...

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