Farm Ireland
Independent.ie

Saturday 25 February 2017

Clean up through trading

Forward selling of grain can be a highly profitable and satisfying enterprise -- as long as you know what you're doing. Here we present you with essential tips and some of the pitfalls to avoid

Caitriona Murphy

Caitriona Murphy

Pictured at the Teagasc National Tillage Crops Forum in Newbridge, Co Kildare, were: (l-r) Barry O'Reilly, DAFF; Mark Plunkett, Teagasc; Michael Hennessy, Teagasc; Philip Doyle, Kildare; Murtagh McWey,
Glanbia; Shay Phelan, Teagasc
Pictured at the Teagasc National Tillage Crops Forum in Newbridge, Co Kildare, were: (l-r) Barry O'Reilly, DAFF; Mark Plunkett, Teagasc; Michael Hennessy, Teagasc; Philip Doyle, Kildare; Murtagh McWey, Glanbia; Shay Phelan, Teagasc

Grain trading in Ireland is undergoing a sea change as farmers seek ways to avoid selling their entire crop on one day. Farmers sold around 150,000t of grain forward this year, a huge increase on the 10,000t that was forward sold in the recent past.

Kildare-based Philip Doyle and his brother, Brendan, are two farmers who use forward selling to their advantage every year.

The pair farm 1,200ac of crops and 400ac of grass in the Athy/Rathangan area and are known for running a tight ship. A large portion of their farmed land is rented.

Straight-talking Philip outlined their methodology at the recent Teagasc tillage crops forum in Newbridge.

The pair buy chemicals from merchants for cash price only, either at 30 or 60 days. All their grain is dried and stored on farm until agreed collection days with their buyers.

"We practise forward selling only, nothing else," he said. "The reason? To prevent a loss occurring on the farm in any year, because when the farm makes a loss someone doesn't get paid."

Mr Doyle said there are four main influences on whether a farm makes a profit or a loss in any year:

Conacre

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"We don't do conacre. I believe you're only getting the scrapings of the pot after another farmer," he said.

"We negotiate with land-owners for land rental on as long a term as possible and we guarantee the farmer that his land will be in a better condition when we are finished with it than it was when we took it."

Selling price of grain

"We need to know what we will be paid for our grain in order to agree land rental rates," he said.

Fertiliser price

"I believe fertiliser price is now as important to tillage production as grain price," he said. "I have 90pc of our fertiliser requirement bought already or have contracts in place for it."

Weather

"Weather is always a factor but we can do little about that," he added.

Based on his own experience, the Kildare farmer compiled a list of "dos and don'ts" for tillage farmers considering forward selling some, or all of their crops.

The 'do' list:

  • Find an accurate source of market information so that you are not relying on what someone says in the local pub. You should be able to access the information quickly and read it in five minutes.
  • Only deal with people who honour contracts completely -- delivery, collection and payment dates should be rigidly adhered to. If you have agreed for collection of 100t of grain and delivery of 100t of fertiliser on the same day and the grain is not taken on time, you are in trouble.
  • Sell little and often in a rising market.
  • Keep everything confidential. Contracts should be kept to yourself or you may not get the deal again.

The 'don't' list:

  • Don't make decisions lightly.
  • Never moan about your deal if prices rise again after you agree to sell.
  • Never be forced into the spot market with your cap in hand to take whatever price you are offered.
  • Never work the 10pc rule to your own advantage. For example, on a 500t delivery, there might be a 10pc tolerance -- don't work it to suit yourself by delivering 505t at a high price or 495t at a low price. This will backfire on you.
  • Stick to the spec of your contract. If your contract is for 100t at 15pc moisture, it should not be half 15pc and half 16pc.
  • Never break a contract -- you won't get another one.

Irish Independent