Why is it increasingly important for farmers to professionally market their grain?
It is becoming more and more important for farmers to sell grain at the right time. It is only in this way that farmers can achieve the highest possible revenue. Information about the weather and other influencing factors – and therefore about the supply – determine the price level. Statistical figures on grain stocks and the demand patterns of the most important buying countries, as well as the reactions of speculators to this, have a considerable influence on prices. In addition, exchange rate movements and changes in transport costs are another important consideration.
Do these factors apply equally to all EU countries or are there differences?
The pricing mechanisms are basically the same across Europe. Grain farmers look to the Euronext futures exchange (Matif) in Paris. This is the most important futures exchange in Europe, and forms the basis for producer prices. Wheat and corn are the most frequently traded agricultural products on the Matif, but oilseed rape also attracts a great deal of attention.
What are the three most important things to which a farmer must pay attention in order to successfully market his grain?
Firstly, it is important to know how a futures market operates. For example, there is a wheat price today for immediate delivery, one for delivery of new crop in August, a price for November and another for February 2018. Farmers should always sell a partial quantity at the highest price level in each case.
The Matif in Paris is the most important stock exchange on which producer prices in every European country are based.
Secondly, the farmer must sell based on market demand. If, for example, Algeria and Egypt buy large quantities of grain and there is demand from traders for the product to export, then the farmer should sell into this demand-driven market.
Thirdly, the farmer must always pay attention to how high the premiums are; that’s the difference between the price quoted on the exchange and the bid price at the seaport or mill. If more is being paid at the seaport compared to the Matif exchange, then this is always a sign to sell as traders are in a good buying mood and the premium ensures revenue for the farmer.
A basic prerequisite for profitable grain trading is the ability to store the grain, isn’t that correct?
Yes. If the farmer stores it himself, he can compare the prices of different trading partners and go with the best offer. This gives him greater leeway when selling his grain. If, however, he stores it with a trader, then he is ultimately more or less forced to sell the product to this trading partner. However, storage with a trader is generally cheaper than procuring one’s own storage area.
How much does the size of the operation influence the selling strategy and when is it worth getting external advice?
The size of an operation has no bearing on the price that can be obtained. Prices will be the same for a 100ha operation as they will be for a farm with 4,000ha or 5,000ha. External support can particularly help smaller and medium-sized operations when it comes to making the decision of when is the best possible time to sell.
What role does one’s gut feeling play in a decision to sell?
All players that are active in the agricultural markets need price forecasts to be able to make decisions on a systematic basis. This is the only way to find the optimum time to sell in the season. Forward-selling a partial quantity of grain and oilseed is generally recommended three to four times a year. That way you usually achieve the highest possible price level. However, a certain amount of gut feeling is also important when it comes to making this decision. And when it comes to this gut feeling, it’s the mood on the market that’s important.