Combinables Price Tracker

Renaultman

Member
Arable Farmer
Location
Darlington
Sell wheat forward and it's futures price (world price), sell spot and it's futures +/- premium/discount, depending on how keen local users are wanting local produce.

Selling forward/locking in contract prices are supposed to be ways of reducing risk for your business. Wheat in this area almost always trades as a premium to futures, £8-£10 is not uncommon, so does selling forward increase or reduce risk?
I would think if you sell forward your location premium would be taken into account, as the merchant will also sell it into that local market and have to compete with other merchants for your grain.
 

Iben

Member
Location
Fife
I would think if you sell forward your location premium would be taken into account, as the merchant will also sell it into that local market and have to compete with other merchants for your grain.

If I sell some wheat now for march 2019, I will get futures price. If I go further forward, say dec 2019, there can sometimes be a discount from futures price (don't know why).

Going back to the march 2019 price, they generally don't offer a premium as they are not desperate to buy that far forward.
 

Renaultman

Member
Arable Farmer
Location
Darlington
If I sell some wheat now for march 2019, I will get futures price. If I go further forward, say dec 2019, there can sometimes be a discount from futures price (don't know why).

Going back to the march 2019 price, they generally don't offer a premium as they are not desperate to buy that far forward.
In that case don't sell if you are confident the premium will still be there, unless you think the market will collapse that is. Being in a Bioethanol catchment area our market premiums can come and go overnight
 

Iben

Member
Location
Fife
That's the challenge selling forward, where will spot price be plus any premium compared to the futures price.

I really just go on, if the futures price leaves me with a reasonable profit after an average yield and predicted growing costs, then sell some to lock in.

Sometimes get it slightly right, sometimes very right, occasionally very wrong!
 

Renaultman

Member
Arable Farmer
Location
Darlington
That's the challenge selling forward, where will spot price be plus any premium compared to the futures price.

I really just go on, if the futures price leaves me with a reasonable profit after an average yield and predicted growing costs, then sell some to lock in.

Sometimes get it slightly right, sometimes very right, occasionally very wrong!
There are a lot of us the same I reckon.
 

Condi

Member
Sell wheat forward and it's futures price (world price), sell spot and it's futures +/- premium/discount, depending on how keen local users are wanting local produce.

Selling forward/locking in contract prices are supposed to be ways of reducing risk for your business. Wheat in this area almost always trades as a premium to futures, £8-£10 is not uncommon, so does selling forward increase or reduce risk?

I would disagree, the physical market will have a premium/discount factored in from the first time it trades and that should be reflected in your ex farm price. The premium over futures can change between seasons, but is just as likely to go up as well as down, depending on local demand and supply and quality.

Yorkshire wheat for 2018 crop for example contains a premium which assumes the bioethanol plants are running, if both of them say they're closing for the season then you could knock £4 or £5 off overnight at the same futures price. Equally if all of Yorkshire has a terrible harvest that premium is going to widen hugely to pull wheat from other areas. The ex farm prices today for new crop reflect the 'average' demand and crop size.

Forecasting premiums over futures is hard because until the harvest in the barn you dont know what your supply is like, and demand can change quickly if a mill has a breakdown for example.
 

Brisel

Member
NFFN Member
Location
Midlands
Put it in a pool mate.

That would suit me - the northern premium for bioethanol wheat would bring the pool price up for us Southerners. Not so good for those who are having the regional premiums diluted by the rest of us.

I do use pools occasionally but my aim each year is to beat them which isn't as hard as you think. I must admit to not beating the osr pools this time around, having missed the peak of the market with 60% still to price in a falling market.
 

fudge

Member
Arable Farmer
Location
Lincolnshire.
That would suit me - the northern premium for bioethanol wheat would bring the pool price up for us Southerners. Not so good for those who are having the regional premiums diluted by the rest of us.

I do use pools occasionally but my aim each year is to beat them which isn't as hard as you think. I must admit to not beating the osr pools this time around, having missed the peak of the market with 60% still to price in a falling market.
There is a regional element to pool results.
 

Hampton

Member
BASIS
Location
Shropshire
That would suit me - the northern premium for bioethanol wheat would bring the pool price up for us Southerners. Not so good for those who are having the regional premiums diluted by the rest of us.

I do use pools occasionally but my aim each year is to beat them which isn't as hard as you think. I must admit to not beating the osr pools this time around, having missed the peak of the market with 60% still to price in a falling market.
Ive been thinking about this thread a lot over the last couple of days, particularly after I watched a very good film called The Big Short.
Basically it's the story about the US credit crisis of 2008 and how it crashed the Economy. It's told from the angle of a couple of hedge funds who worked out what was going on and shorted against it. One of these hedge funds, even though they were right, went bust as the investors lost confidence in the boss and the crash didn't happen quickly enough.
My point is that only a very small proportion of the brightest minds in the World realised what was going to happen, and even on of those did not benefit from it.
If you apply that to the grain trade, the traders are told info by the managers and the managers get second/third hand information from their sources depending on how much they pay for their research. Most of these people although decent at their jobs are not superstar wiz kids otherwise they would be in different jobs.
What hope have we got of ever getting it right?
 

Renaultman

Member
Arable Farmer
Location
Darlington
Ive been thinking about this thread a lot over the last couple of days, particularly after I watched a very good film called The Big Short.
Basically it's the story about the US credit crisis of 2008 and how it crashed the Economy. It's told from the angle of a couple of hedge funds who worked out what was going on and shorted against it. One of these hedge funds, even though they were right, went bust as the investors lost confidence in the boss and the crash didn't happen quickly enough.
My point is that only a very small proportion of the brightest minds in the World realised what was going to happen, and even on of those did not benefit from it.
If you apply that to the grain trade, the traders are told info by the managers and the managers get second/third hand information from their sources depending on how much they pay for their research. Most of these people although decent at their jobs are not superstar wiz kids otherwise they would be in different jobs.
What hope have we got of ever getting it right?
Probably about the same as anyone else. Using threads like these, in communication with other farmers all over the world who often tell you what is actually happening, not what the brokers want you to hear. Doing a bit of Grain haulage and keeping good contacts with people on the ground has been a massive boon in the past as well. Currency though? I have no idea how that works.
 

franklin

New Member
I wonder what % of the money in grain futures / options is actually hegding risk for millers / consumers, and what % is speculation.

Sad when leveraged speculation on wheat is more profitable than growing wheat - perhaps the politicians could tax the hell out of it as its not exactly promoting economic growth is it?
 

Hampton

Member
BASIS
Location
Shropshire
I wonder what % of the money in grain futures / options is actually hegding risk for millers / consumers, and what % is speculation.

Sad when leveraged speculation on wheat is more profitable than growing wheat - perhaps the politicians could tax the hell out of it as its not exactly promoting economic growth is it?
In 2008 Citigroup was leveraged at 35:1. The more apt question is do the politicians actually care.
 

franklin

New Member
The only data I have quickly to hand was that in the mid 90s speculation was around 15% of US food financial instruments. By the mid 2000s is was approaching 60%. I'd care about that personally. I have very little concern for politicians.
 

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Man fined £300 for bonfire-related waste offences

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Written by William Kellett from Agriland

court-640x360.jpg
A man has pleaded guilty at Newtownards Magistrates’ Court to waste offences relating to a bonfire next to the electrical sub-station on the Circular Road in Newtownards, Co. Down.

Gareth Gill (51) of Abbot’s Walk, Newtownards pleaded guilty to two charges under the Waste and Contaminated Land (Northern Ireland) Order 1997, for which he was fined £150 each and ordered to pay a £15 offender’s levy

On June 25, 2018, PSNI officers went to Gill’s yard, where they found a large amount of waste consisting of scrap wood, pallets, carpet and underlay.

Discussion with Northern Ireland Environment Agency (NIEA) officers confirmed the site...
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