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Saturday 3 December 2016

Forward selling a way to manage risk, not a recipe for making money

Mark Woods farm manager of a 2,600ac estate in Hertfordshire, England

Published 01/02/2011 | 10:58

I have forward sold our harvest every year since I started eight years ago. It is usually of the order of 5,000t. Typically, I will sell 25pc of our estimated harvest up to two years beforehand. Another 25pc will be sold around planting time. The next quarter is sold during the planting season, when I can see how the crop is performing. The last quarter isn't sold until it is in the shed, and I know exactly what volumes I have left to sell.

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We forward buy all of our fertiliser. This is typically done at the end of the previous harvest. Then I do all my predicted costings for next year. I also factor in a minimum of 5pc for reinvestment. This is the minimum price I will lock in at.

I'm a strong believer in focusing on the average price that we've secured during the year, as opposed to the high or the low that we hit or missed. We've averaged €164 for our wheat so far this year. We've never been below the average price for grain in the year.

There's no black and white recipe for making money by forward selling. We look at it more so as a way to manage risk. I can't afford to play fast and loose with the farm's output and gamble on a good price at harvest. Most farm managers here would be operating similar marketing systems. I listen to grain traders very carefully since they are in the game for the long haul."

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