Forward selling grain can play a role in minimising cereal growers’ financial risk exposure, particularly during a period of inflated input costs.
Michael Hennessy, the head of Teagasc crops’ knowledge transfer department, explained: “Farmers can use the option of forward selling as a means of agreeing a price with their merchant for grain to be delivered at an agreed time, at or post harvest.
“So, it acts to deliver a degree of security for both the grower and the grain buyer.
“This is also the case where the buyer of the grain is the supplier of inputs to the grower. One process acts provides a degree of balance against the other,” he added.
Is forward selling grain for everyone?
However, Hennessy stressed each grower should decide when the best time to sell the grain is for themselves.
“Teagasc advisors will work with growers to determine their total cost of production and what constitutes a possible break even selling price,” he explained.
“Growers can then make their own minds up as to when they sell their crops and the price they are happy to accept.”
But given the current state of international fertiliser markets and the increasing costs of all other inputs, Teagasc is actively advising cereal growers to consider the role that forward selling grain could play within their business model at the present time.
“It certainly is an option well worth considering at the present time,” Hennessy continued.
Glanbia was asked if forward selling of grain can be used to help mitigate the impact of an increased credit requirement within a tillage operation.
A spokesperson for the business told Agriland:
“We offer forward selling of grain on an ongoing basis, with weekly price offers sent by text to farmers. This has been in place for a number of years and a significant proportion of the crop is sold forward each year.
“However, this is more a price risk management tool rather than a cash flow tool, or the grain is paid for on delivery, at the pre committed price,” the spokesperson concluded.