Accounting Dissertation: The use and adoption of Forward contracts within the United Kingdom in order to decrease Volatile Milk Prices

[ellisramsay]

I am currently in my fourth year of studying Accounting at Glasgow Caledonian University. I am also from a Dairy & Beef farm in South West Scotland. For my dissertation I have chosen the topic of applying Forward Contracts within the Dairy Industry in order to try and decrease the ever-increasing volatile milk prices. I am currently undertaking my data collection in the form of this survey, as well as interviewing my dad and uncle. I would appreciate if this survey could be spread widely to dairy farmers as well as anyone within the dairy profession.

The survey can be found here: https://docs.google.com/forms/d/e/1...RYCemXFKybWn3IKFEv9JH_cGIFwXFlCzdYsEcb1uIB_bs

It shouldn't take longer than 5-10 minutes and any opinions are greatly welcome.

Thank you, Ellis

 

[Fiacre]

40% of milk production sold forward for five years at £1 per litre? Surely there’s a danger people could get killed in the rush?

In truth, not many would believe in the sustainability of such milk price and would probably avoid any purchaser offering such terms. However, good luck with the survey.

 

[ellisramsay]

40% of milk production sold forward for five years at £1 per litre? Surely there’s a danger people could get killed in the rush?

In truth, not many would believe in the sustainability of such milk price and would probably avoid any purchaser offering such terms. However, good luck with the survey.

Thank you, haha yes I agree, the reasoning behind such a question was to show that when elements of risk are eliminated, e.g offering £1/litre, farmers may be more likely to adopt forward contracts!

 

[buffalo_soldier]

Well I've signed up for your £1/L. Many thanks.

I will probably reduce the herd by 60% though if thats ok

 

[Bald Rick]

Glanbia Ireland offer forward contracts and Yewtree wil offer a percentage fixed if they’ve sold powder forward
I would try and speak with both if I was you

One problem is that you’d need to know your exact CoP, have bomb proof forward inputs contracts and fix enough milk to make it worthwhile. Unfortunately until the U.K. adopts a milk futures market, it’s a bit pie in the Sky

 

[onesiedale]

Yew Tree have made a start. Their forward contract does give some stability, but it will take time to change the mindset of an industry so focused on what the spot market might give.
Too many are looking over the fence at other prices and forget about their own cop. Same goes for the milk buyers too .
As @Bald Rick said, get costs under control, then forward trading can happen with confidence.

 

[Boysground]

Done, I'm actually a mixed dairy arable farmer.

Did look into forward selling with my previous processor, it was never really going to work as the systems that were suggested were always going to be too complicated,

Bg

 

[RJ1]

Completed. Said I would enter into all three types. On principle, I would, but the £1/litre is so far removed from where we are now that it's difficult to predict what would happen to the spot, and therefore your overall price.

As a new milk producer in a joint venture, forward contracts are invaluable for achieving budget forecasts and managing our risk. We're waiting to hear how much our processor will fix for us. Frankly, foregoing a chance that the spot price will be higher in return for certainty that we will receive well above our budgeted milk price for a year is well worth it.