2016/17 milling wheat premiums

[Grains Guru]

Thanks for your contribution. I'll put the swearing and insults to one side and attempt to debate the point.

I have to ask you though, are you one of these merchants who has caught a cold doing buyback contracts this year? You don't sound too happy... oh, and you're allowed to disagree with me so no need for apologies. We are all entitled to an opinion and allowed to express it.

Regarding your comments about 'full spec'. What is 'full spec'? Very little wheat actually gets delivered as FULL Spec but every day less than 13% Protein wheat turns up on 'full spec' contracts and gets tipped.

Which is why the mills buy lots of imported wheat and almost all flour mills have fallback's on milling wheat contracts. So, you're wrong. 12.6% Protein wheat has a home on a full spec contract doesn't it? As some very large milling homes can be found with a £1 per 0.1% fallback to 12 or £1.50 to 12. So, in my book, if you're offering the grower a good service you would naturally offer him the best possible fallback's in the market place before you cancel his over the market milling wheat buyback. I call it good practice but what do I know? Not a lot according to you.

How can the feed base be different from another 'feed base'? We don't have multiple feed values in the market. Feed 'base' value is what it is on any given day. The feed wheat price is relevant to the grower. From what I have been led to believe, when growers enter these contracts they do so on the basis that they can fix the feed base when they want. My post was about such growers who have attempted to do so and found that they are £'s out from what others are offering. Guess what? It had not happened to them in the last 3 years, so why now? When all the growers concerned have sold is 'X £ min premium over feed' which happens to be massively over the market and with no terms on the contract about the feed base. I've heard this more than once in recent times.

I know the milling wheat market and I know that not many millers contract wheat on buybacks. So good luck with that story, it's not right and it does not fit.

My entire point was to highlight the issue of feed base pricing and to make growers aware about hammering out the detail so all know where they stand. I'm amazed at your reaction to this point about feed base pricing but not surprised.

Buybacks / min premium contracts are good deals for farmers. I am openly encouraging growers to lock into more because they are great deals for farmers and there are not many of them about in the current climate. I don't care who they contract them with but just be aware of the terms because I know, that when some in the market get into trouble they look for any angle they can to discount or walk away from it and that's not fair on growers with 12 + / 76+ / 250+ Group 1.

This is happening.

 

[Condi]

I am very happy thank you, but simply believe what you put is wrong.

I still disagree with your points, but have nothing more to add than I have already put, which is all from my own experiences. Getting into an internet argument doesnt particularly appeal, and so will leave it at that. You can argue my points 'dont fit', or are wrong, but all that really says is you dont understand it

 

[Grains Guru]

Nobody is in an argument. You have vociferously disagreed with the points I made so I thought we could debate them but if you now don't want to and you don't want to answer my questions or reply to the counter points I have raised, well, I respect that. But it would suggest it is you that does not understand it and I'm not sure it makes your point of view overly strong but you're entitled to it. All the best.

 

[Condi]

The point is we can 'debate' it all we want, but you cant prove your argument and I cant prove mine. Yours are obviously based on your experiences and mine are based on mine so whats the point? I vociferously disagreed because in my experience your points were wrong, but I cant say that such things dont happen. No doubt some companies might kick out wheat at 12.9%, or certainly contractually reserve the right to, although I dont know of any and so the point is moot. I can also tell you that millers do offer minimum price contracts to merchants, but Im certainly not going to prove it. And so rather than a fruitless debate I decided to leave things as they were.

 

[Grains Guru]

I don't have an argument just an opinion. I get that you don't like it but you won't respond and as said I respect that.

My original post was about growers being clear on the terms of the min premium contracts. If they are clear on the feed base terms some merchants have invented this year and the 'no fallback terms' on min £25 / £20 contracts then all well and good. I would suggest most are not.
As you've already alluded to, there is a lot of confusion and differing interpretations on contractual points. Growers making sure they are totally clear on these terms saves everyone a lot of strife and stops *merchants pulling fast ones!

*To be clear not all and certainly not most merchants pull fast ones but I have heard of some.

 

[Mad Farmer]

Well I can prove it. I wanted to fix the feed base last week on some milling wheat. Was offered £103. Sold some feed wheat the same day to another merchant and got £107.

 

[Condi]

Well I can prove it. I wanted to fix the feed base last week on some milling wheat. Was offered £103. Sold some feed wheat the same day to another merchant and got £107.

What does this prove? All it says to me is that the feed mill is a £4 closer haul than the milling home...

 

[Grains Guru]

What from Worcestershire? Don't be tit. Hello Manchester feed market, Hello Manchester and Liverpool milling markets.

Based on your maths I'm not sure I'd want to do too much business with you.

 

[Condi]

Yawn. You obviously dont know your markets. Hereford/Clearwell is a much better feed market this year at +1 or +2 over futures than Manchester at +4 or +5 for Worcestershire wheat. For milling wheat however it probably does travel, so everything is in order and it all makes sense.

Not sure I would want to deal with any merchant who doesnt know his local market or who enjoys moving wheat around the country for fun.

 

[Grains Guru]

Oh look he's back disputing my point even though a farmer has posted on here saying it's happened to him. I think you protest too much Condi. Based on your post you're the one who has no idea where the markets are. Good luck with your £1-£2 over into Hereford/Clearwell. You'd buy the crop at those premiums today.

What about Portbury Feed wheat v Avonmouth G1 Milling wheat? Does that give a £4 differential in feed base? Does Manchester Feed v Manchester Group 1 give a £4 differential? The answer is of course, no. Merchants pulling the wool over the farmers eyes because they can't take the min premium they have committed to because they are losing on it.
Are you in a mess with these contracts Condi?

I'm guessing you'll also make some shifty reply because you won't want to discuss anything further....

 

[Condi]

This is getting increasingly pointless and not showing anyone in a good light.

Im not disputing what the farmer says, what Im saying is that people, seemingly including you, dont understand how they work. I agreed that what the farmer had been told was correct - its not pulling the wool over anyone eyes. Let me explain...

Avon 4 wheat is bid +1 futures, Hereford/Clearwell is therefore worth the same. Worcester to Hereford is going to be £6-7 haulage. Worcester to ADM Avonmouth will be nearer £9 or £10. Hence £4/t difference in haulage costs (£6vs£10).

If you price it Portbury vs Avonmouth, or Cerestar vs RHM then obviously the difference will be £1 at most, but you surely price the feed off the best home (Hereford) and the milling off the closest/best milling home, and so hence the difference in base price? EVERY merchant who offers these contracts does the same, aside from ADM who offer min 15 or min 20 depending on distance from one of their mills.

Anyway, whatever. I cant make it any more simple. You appear to be trying to discredit the contract, and the merchants who offer them.



Suffice to say any farmer who finds any min/max's for next year should lock into them considering the amount of G1 wheat in the ground looking good. If you dont understand how they work talk to your merchant and they will explain, or fix at a known discount to futures. No merchant wants to 'pull the wool' over anyones eyes, as all that does is create bad feeling to one party. But at the same time, the min/max product is different to a normal feed wheat contract and so has different terms. You can borrow money from a bank at many different interest rates, costs etc. Its the same idea - different products for different customers.

 

[Grains Guru]

No, wrong again. The only discrediting going on here is from you and your attempt to shut down this debate because you 'understand' all of the goings on and everyone else does not. This nothing to see here type of attitude smacks of arrogance and someone who could well be playing the games described. All merchants offer some form of buyback or min premium contract. Most stand by them but a few are not and they are playing dishonest games on the feed base.

Hence, my post about growers being aware of the contract terms they are entering into - especially the feed base aspect because that is where some merchants are attempting to screw farmers on because they are the wrong side of the contract - by a long way. And this is the point that seems to have provoked such a furious reaction from you.

There is even a farmer on this thread claiming it's happened to him and you attempted to dismiss that.

Your values are way off by the way. The mills in the Gloucs/Worcs/Hereford area are discount area's so, no, they do not trade at the same price as AVON/Portbury wheat. FYI Jan AVON wheat was offered at minus 1 on Friday with no bid in the market.

Anyway, this is my last post on this thread. Growers just be aware of the terms on the contract!!! Protect yourself from the unscrupulous among us!

 

[JCfarmer]

Goodness me, Its Christmas!!! Any trader with a good/honest min/max contract pm me please.

 

[shakerator]

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?

 

[Condi]

You can ask, but I suspect I know what the answer will be. Where is the advantage to the merchant doing that? ie Why would we say yes?

 

[Grains Guru]

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?

There should be no problem cash settling your min premium contract. As in your example if you've sold min £20 and the market is £13 then you should net a nice windfall of £7/mt.

The merchant can replace the milling wheat in the market so they do not lose out.

 

[Condi]

In theory yes, but I doubt you'll find one who will. As I said, why would a merchant agree to cashing it out? What advantage is there to him doing so?

 

[Iben]

In theory yes, but I doubt you'll find one who will. As I said, why would a merchant agree to cashing it out? What advantage is there to him doing so?

What is the disadvantage?

 

[Grains Guru]

Condi, I have and will do it - so you've found one. If a grower wants to buy back a contract, premium or flat price why would anyone stop him from doing so?. As long as the prices/premiums are based on replacement it's just everyday buying and selling.

Everyone has a profit and loss in the deals they do. If a party chooses to lock into that they should not be prevented from free market trading by the merchant. Another example of poor and shoddy practice.

 

[shakerator]

Condi, I have and will do it - so you've found one. If a grower wants to buy back a contract, premium or flat price why would anyone stop him from doing so?. As long as the prices/premiums are based on replacement it's just everyday buying and selling.

Everyone has a profit and loss in the deals they do. If a party chooses to lock into that they should not be prevented from free market trading by the merchant. Another example of poor and shoddy practice.

I think farmers should have the same "rights" as traders in this scenario