Dalmark gone?
- Thread starter Spashett
- Start date
Exactly there's always someone out there with a broken calculator or other reasons for undercutting competition, last man standing and all that
- Location
- Westish Suffolk
Such is the nature of the grain trade nowadays, some merchants will often sell heavily to a particular mill to try to capture or control the local market for themselves. Same with some export trade, and that's where the big losses can occur if they get it wrong when they have to trade out, or execute, the sale.
If they make one loss, they then have to make two profitable trades to stay in the game.
If they make one loss, they then have to make two profitable trades to stay in the game.
Some of this is the merchants own fault. Poor senior management, inappropriate remuneration (reps paid on tonnes not margin), bad decision making, taking of excessive risk, the chasing of market share rather than profitability.
Some of it is yours. Not valuing the service your merchant gives to you highly enough. The margins even for profitable merchants are slim, smaller still for hauliers. What’s £58 on a £10k load of oilseed rape?
Don’t begrudge the merchant a profit or begrudge his margin if you think he deserves it. Consider their advice and help over the years. Consider where they plan to take your grain. Take into account the personalities of the people you are dealing with.
Look into who carries credit insurance, and who is covered by that credit insurance. Look into the structures of the companies, subsidiaries of foreign owned companies or large corporations are more complex, not necessarily for the better.
In the language of the supply chain, you are a supplier to the merchant not the customer. The merchant is a supplier to the flour miller/feed customer etc and is treated more like one. Timed delivery slots are common, so help the merchant and haulier to achieve them. Be honest about your loading capabilities. Don’t ask for a carry when the last loads falls into a new calendar month when you’ve been unable to load two days a week for the past month.
The few pounds a tonne between buyers on any given day has a much smaller impact on a sellers bottom line than choosing the right time to sell. Even the relatively flat market of the last 12 months has seen a swing of £10 per tonne. Some years that has happened in a day, and prices have moved £50 to £100 per tonne in the season.
In reality the best contracts are offered to the most reliable, most honourable, most loyal growers, not growers who tout their produce around in Dutch auctions. These relationships take time to build. The threat of larger players intent on running at a loss for years to squeeze others out is real.
Do put a value on service when you’re selling. It’s in your interests. Rant over!
Some of it is yours. Not valuing the service your merchant gives to you highly enough. The margins even for profitable merchants are slim, smaller still for hauliers. What’s £58 on a £10k load of oilseed rape?
Don’t begrudge the merchant a profit or begrudge his margin if you think he deserves it. Consider their advice and help over the years. Consider where they plan to take your grain. Take into account the personalities of the people you are dealing with.
Look into who carries credit insurance, and who is covered by that credit insurance. Look into the structures of the companies, subsidiaries of foreign owned companies or large corporations are more complex, not necessarily for the better.
In the language of the supply chain, you are a supplier to the merchant not the customer. The merchant is a supplier to the flour miller/feed customer etc and is treated more like one. Timed delivery slots are common, so help the merchant and haulier to achieve them. Be honest about your loading capabilities. Don’t ask for a carry when the last loads falls into a new calendar month when you’ve been unable to load two days a week for the past month.
The few pounds a tonne between buyers on any given day has a much smaller impact on a sellers bottom line than choosing the right time to sell. Even the relatively flat market of the last 12 months has seen a swing of £10 per tonne. Some years that has happened in a day, and prices have moved £50 to £100 per tonne in the season.
In reality the best contracts are offered to the most reliable, most honourable, most loyal growers, not growers who tout their produce around in Dutch auctions. These relationships take time to build. The threat of larger players intent on running at a loss for years to squeeze others out is real.
Do put a value on service when you’re selling. It’s in your interests. Rant over!
I put a large value on the service of a local merchant, they sold to Countrywide, but because the people largely remained unchanged that I dealt with, the service was largely unchanged too. Countrywide sold out to Openfield and the last man connected to the old firm, and my favoured contact, retired recently.
So now I am back where I started about 15 yrs ago, with no offence intended to the people at Openfield, a small fish dealing with a large and fairly impersonal organisation, and as mentioned by others, apparently a loss making one at that.
Fortunately there is an independent mill close by with whom we also have a good relationship and they have been getting more of the business because I value highly the personal contact with the people with whom we deal.
So now I am back where I started about 15 yrs ago, with no offence intended to the people at Openfield, a small fish dealing with a large and fairly impersonal organisation, and as mentioned by others, apparently a loss making one at that.
Fortunately there is an independent mill close by with whom we also have a good relationship and they have been getting more of the business because I value highly the personal contact with the people with whom we deal.
the issue for me is risk, I simply cannot afford for a merchant to go bust on me, its a single biggest risk to my business
so when I can get the same price from a rock solid international blue chip merchant why on earth would I risk trading with a local trader or family business ?
Its sad I know but taking that risk just so I can say I support small business would be crazy
so when I can get the same price from a rock solid international blue chip merchant why on earth would I risk trading with a local trader or family business ?
Its sad I know but taking that risk just so I can say I support small business would be crazy
Completely agree that third party credit risk is a significant risk to your business. It doesn't automatically follow that you should avoid smaller businesses as a consequence.
Do you due diligence, look at accounts on Companies House. A well established business with good management, a track record of profitability and necessary credit insurance is possibly more secure than a UK offshoot of a multi national. The accounts will certainly be more transparent.
Do you due diligence, look at accounts on Companies House. A well established business with good management, a track record of profitability and necessary credit insurance is possibly more secure than a UK offshoot of a multi national. The accounts will certainly be more transparent.
There is such a business - it's called Openfield
I was thinking more farmers actually merging their farming businesses, rather than grain co-ops. It is fairly easy for a merchant or chem firm to buy another - their relative capital value compared to turnover and profit are quite small. The opposite is true for farming - even adding 50% more land to a farm in terms of asset purchase may be a once-in-a-lifetime thing. I'd like to see more farmers in the same area sitting down and actualy joining their businesses together to reduce the number of people actually selling and buying. The likes of Openfield would work better if:
1) Farmers would committ all their grain every year,
2) The seller and merchant worked together with better cashflow planning and storage to maximise the grain that was able to be held, and reduced the need for any forced selling.
Not going to happen, hence we will aways be the weakest link in the supply chain.
accounts are usually a very dated view given CH filing deadlines etc. unpredictable stuff can happen even to good business
Why take the risk when you can get same or better prices from international blue chip buyers ?
What about us tenants? There will be plenty of farm businesses merging post Brexit. That's where a lot of the economies of scale will have the most difference to the farm bottom line. Buying groups or FMP cover the procurement side nicely already. On the selling side, reading this thread, there will only be a few multinationals left anyway. Then watch them turn the screws on us
6 major supermarkets - Aldi, Lidl, Tesco, Sainsburys, Asda, Waitrose
4 major millers - ADM, Allied, RHM, Whitworths
5 major grain merchants - Frontier, Glencore, Gleadell, Openfield, Cefetra
4 major agchem companies - Syngenta, Bayer Monsanto, BASF, Dow Dupont
4 major agchem distributors - Agrovista, Agrii, Procam, Hutchinsons
3 major fertiliser companies - Koch, CF, Yara
4 major tractor manufacturers - CNH, Deere, Agco, SDF
1 sugar beet processor - British Sugar
Tens of thousands of UK farmers
Who has the least market power?
I agree about Openfield. Committed grain gives them good opportunities. Shame they really peed off so many members when they took on DHL to do their logistics & recent performance as ex farm traders has been so poor too. Always £3-4/t off the market around here so I haven't sold them anything for a while.
The fewer numbers of each lets them speak with one voice. That is the strength. We cant manage to do that, as has and will be discussed ad infinitum.
- Location
- Westish Suffolk
Understand that, but doesn't that bring about the barley weasel warning of 3 multinationals, one price, and a take it or leave it ?
indeed it does but I cant afford the risk just to keep the little guys in business.
- Location
- Bedfordshire
I do at least half of my business with a relatively small company, owned by the farmers who trade with it, and its all debt insured. Crop Marketing Groups Ltd. (CMG)
Farmer-George
Member
Our business works on the same theory Clive. We only deal with companies that we can insure our trading risk against, anyone we can't insure against that wants to purchase our wares we will deal with on a pro-forma basis only.
Companies House data is always out of date but good for building a picture up over the years, so we stick to the multinationals too, we get better prices consistently, we get paid on time and we get sensible movement. Occasionally there are some loads right roll but it happens, the merchant isn't in control of the end user, it happens.
Daniel
Member
- Location
- Mildenhall, Suffolk
I don't see that trading with small companies is a risk necessarily, all of our eggs go to a family firm with about 50 employees, they pay 2 weeks after collection, so my risk is really only those two weeks, no need to insure it, as long as the payment dates don't slip.
As discussed elsewhere over the years I still keep returning to the idea of home milling feed and buying the grain from local smaller farms, i'd need 1000t delivered equally through the year, so not a massive amount in some senses but there are still a few farms round here growing 50-100ac or so of wheat on council tenancies, so it would be a good fit with them you'd think. Especially if our poultry numbers increase in the medium term and possibly you could develop a machinery sharing aspect.
I think it needs a solid pricing agreement that hedges risk for both sides. Ideally you'd take the average price from August-July and pay that, but you wouldn't know what the average was until the July so it would need a degree of trust and a balancing payment?
This is probably why there are only a few large merchants!
[QUOTE="Daniel, post: 4803770, member: 315"As discussed elsewhere over the years I still keep returning to the idea of home milling feed and buying the grain from local smaller farms, i'd need 1000t delivered equally through the year, so not a massive amount in some senses but there are still a few farms round here growing 50-100ac or so of wheat on council tenancies, so it would be a good fit with them you'd think. Especially if our poultry numbers increase in the medium term and possibly you could develop a machinery sharing aspect.
I think it needs a solid pricing agreement that hedges risk for both sides. Ideally you'd take the average price from August-July and pay that, but you wouldn't know what the average was until the July so it would need a degree of trust and a balancing payment?
[/QUOTE]
Big perk for them is a delivered price for a short haul. If you can mill it fine at 16% you would be on a winner.
I think it needs a solid pricing agreement that hedges risk for both sides. Ideally you'd take the average price from August-July and pay that, but you wouldn't know what the average was until the July so it would need a degree of trust and a balancing payment?
[/QUOTE]
Big perk for them is a delivered price for a short haul. If you can mill it fine at 16% you would be on a winner.
Daniel
Member
- Location
- Mildenhall, Suffolk
Big perk for them is a delivered price for a short haul. If you can mill it fine at 16% you would be on a winner.[/QUOTE]I can't see why you couldn't, as long as it hadn't grown any moulds and shattered in the mill then it would be fine i'd imagine.
I expect people would haul it to us with a tractor or we could collect it if nearby. Delivering your own produce is fine on red diesel, and I think i'd be ok as i'd be collecting feed for my own animals?