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Arable Farming
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Combinables Price Tracker
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<blockquote data-quote="Condi" data-source="post: 4756872" data-attributes="member: 13446"><p>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. </p><p></p><p>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. </p><p></p><p>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.</p></blockquote><p></p>
[QUOTE="Condi, post: 4756872, member: 13446"] 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. [/QUOTE]
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