The dairy industry must use every tool available to better manage the volatility that is becoming the norm in the sector says NFU President Meurig Raymond.
Mr Raymond, a dairy farmer with 620 cows in Pembrokeshire, opened the NFU's Dairy risk Management Conference in Solihull, telling delegates the potential benefits of dairy futures could be worth exploring as the industry recovers from the latest market downturn.
He told delegates: "We want to see increased use and uptake of innovative, new tools that help balance the price risk between farmer, processor and end-user - and dairy futures could be one answer.
"A processor and manufacturer are afforded the capability to hedge their market risk, locking in a longer term price for a commodity, be it skimmed milk powder, butter or cheese. The farmer may also in turn be presented with the opportunity to lock in over longer periods a proportion of their milk at a price agreed with the processor. This provides greater stability, certainty and in turn promotes confidence."
Mr Raymond went on: "Futures also provide greater transparency around market expectations over the medium term. This enables the supply chain to plan ahead, manage production and ultimately mitigate the risk presented by the peaks and troughs of supply. Transparency with it carries many benefits, it aids price discovery allowing different marketing arrangements to develop such as market linked formula pricing and forward contracts.
"But we also are aware of the challenges. Dairy futures require reliable market price indices to settle against."
Market round-up
United Auctions sold 845 store heifers at Stirling on Wednesday to a top of 278.8p per kg and an average of 229.3p (+8.9p on the week), while 886 store, beef-bred bullocks peaked at 304.3p and levelled at 233.8p (+5.1p). Seventy-seven store, B&W bullocks sold to 186.7p and averaged 160.7p (-5p).
C&D Auction Marts Ltd sold 7 prime heifers in Dumfries on Wednesday to a top of 228p and an average of 209.3p.
In the rough ring 20 beef cows sold to £1508.80p per head and 174p per kg to average 137.6p, while 47 dairy cows peaked at £1232 and 154p to level at 114.4p.
The firm also sold 671 prime hoggs to a top of £90 and 187p to average 173.2p (-8.2p).
The 174 cast sheep forward saw heavy ewes sell to £130.50 for Texels and average £84.78 (+£13.20), while light ewes peaked at £67.50 for Blackfaces and levelled at £51.21 (+11p).
Messrs Craig Wilson Ltd sold 411 prime hoggs in Newton Stewart on Wednesday to a top of £83.50 and 181.9p to average 161.9p (-13.1p).
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