How do they do it?

[fudge]

Reading the fwi account of the change of ownership at Gleadell makes me wonder how such thin margins can work? After the latest round of consolidation will the situation in the grain trade improve or is it more of the same?

 

[Brisel]

I think we're not the only part of the food supply chain with margins continually chipped away at by those with more market power than us, plus more regulations costing time and effort that doesn't generate income. Less margin per tonne means more tonnes traded to make the same number. The abattoirs and millers are all consolidating too.

 

[Widgetone]

They don't in the end, hence all the consolidation over the years.
To add to merchants woe, buyers are 'asking' for extended credit terms ( 60/90 days etc ) so cashflow is rubbish to boot.
So merchants turn over heaps of money for wafer thin margins, what can possibly go wrong?

 

[Chae1]

I think we're not the only part of the food supply chain with margins continually chipped away at by those with more market power than us, plus more regulations costing time and effort that doesn't generate income. Less margin per tonne means more tonnes traded to make the same number. The abattoirs and millers are all consolidating too.

Perhaps we should start consolidating too.

A co-op anyone?

 

[Brisel]

Perhaps we should start consolidating too.

A co-op anyone?

We have been doing just that. Look at the likes of Velcourt and other contract farming businesses. Still a long way to go & you do wonder just how efficient scale can be when you're stuck with 5 acre fields in places as well as having a broad well segmented market.

 

[Bogweevil]

Co-ops or Producer Organisations as we call them nowadays are tricky for commodities, you cannot easily get enough participants when many producers operate in a market, but can work for high value specialty crops - UK producer organisations:

ABB Marketing
Anglian Pea Growers
Angus Growers
Asplins, The
Aylsham Growers
Berry Garden Growers
East of Scotland Growers
FarmFresh PO
Fen Peas
Fresh Growers
Fruit Growers Alliance
Fruition PO
G’s Growers
Green Pea Company, The
Greenshoots
Growco
Holbeach Marsh
Mid Kent Growers
Mockbeggar
Northway Mushrooms
Plantsman PO
Scottish Borders Produce
SGT (Society of Growers of Topfruit)
Snaith Salads
South Devon Organic Producers
South Eastern Produce
Speciality Produce
Stemgold Peas
Suffolk Produce
Swaythorpe Growers
Waveney Mushrooms
Westgrowers
Wye Fruit

Growers have to surrender considerable independence to the PO managers which sit uneasily with many growers...

 

[yellow belly]

The problem for the cereal farmer with this is that many of the large grain traders now belong to international traders who control big users of uk grain and have no interest in exporting grain this is no problem until the uk has a good harvest and has to export several million tonnes of grain

 

[Flat 10]

The problem for the cereal farmer with this is that many of the large grain traders now belong to international traders who control big users of uk grain and have no interest in exporting grain this is no problem until the uk has a good harvest and has to export several million tonnes of grain

Never thought of that. But if prices were in their favour ie we were below export parity they would be keen to move it.....

 

[quattro]

Perhaps we should start consolidating too.

A co-op anyone?

Is Aberdeen grain classed as a co-op,tied up with frontier

 

[Chae1]

Is Aberdeen grain classed as a co-op,tied up with frontier

I think thats the thing with most co ops they need to be linked with a big merchant.

 

[Al R]

Co-ops or Producer Organisations as we call them nowadays are tricky for commodities, you cannot easily get enough participants when many producers operate in a market, but can work for high value specialty crops - UK producer organisations:

ABB Marketing
Anglian Pea Growers
Angus Growers
Asplins, The
Aylsham Growers
Berry Garden Growers
East of Scotland Growers
FarmFresh PO
Fen Peas
Fresh Growers
Fruit Growers Alliance
Fruition PO
G’s Growers
Green Pea Company, The
Greenshoots
Growco
Holbeach Marsh
Mid Kent Growers
Mockbeggar
Northway Mushrooms
Plantsman PO
Scottish Borders Produce
SGT (Society of Growers of Topfruit)
Snaith Salads
South Devon Organic Producers
South Eastern Produce
Speciality Produce
Stemgold Peas
Suffolk Produce
Swaythorpe Growers
Waveney Mushrooms
Westgrowers
Wye Fruit

Growers have to surrender considerable independence to the PO managers which sit uneasily with many growers...

Puffin Produce in Haverfordwest?

 

[fudge]

I think thats the thing with most co ops they need to be linked with a big merchant.

Sadly this is true. End users have gravitated to the suppliers who have the financial clout to hedge all their trades. Difficult to see how small coops can provide this service to end users. TBH as a profitable small farmer I wouldn’t want to be involved cooperatively,or otherwise, with futures trading.

 

[Brisel]

Anyone can hedge a trade. It's unusual not to have some means of covering a purchase in case a deal with the farmer isn't physically sold onwards & the market moves against them. If there isn't a feed mill wanting to take cover they use futures, allowing themselves a couple of quid margin in the middle to cover their time, overheads and shifts in transport costs. Allegedly, a lot of the Openfield loss in 2017 was an unhedged position. In the UK grain trade, you'll see more losses after a small harvest. A £2 margin isn't enough when your annual tonnage is 20% down because the weather was wrong that year.

The big guys have the better quality market information to make the learned choice. Cargill & ADM will have teams around the world keeping an eye on crops, politics and consumers, then be able to know a change before it is reported in the media to the other players who don't have those resources & act on second hand information with a time delay. The big guys can also play the waiting game and run at a loss for a while if they want to snap up more market share, if that's part of the major strategy in that region. Big isn't always beautiful - Glencore's woes stemmed from investing heavily in minerals before the credit crunch and recession that reduced the demand.

 

[Bogweevil]

Puffin Produce in Haverfordwest?

Subsidiary of Puffin Investments