The real futures market, and why this site is nowhere near it.
Farms genuinely trade forward. Euronext milling wheat futures are traded in Paris every working day by people managing exactly the risk described on the red-line page. It is a serious, regulated activity, and it is worth explaining precisely because nothing on this site is any part of it.
What a grain farmer is actually exposed to.
Two variables, multiplied together, neither of which they control: how much comes off the field, and what it is worth when it does.
A good yield in a year of low prices and a bad yield in a year of high prices can produce the same income. What ruins a business is the combination — a poor harvest sold into a weak market — and that combination happens often enough that managing it is a real discipline rather than a spreadsheet exercise.
The instruments exist because of that. Forward contracts with a merchant, pool contracts, minimum price contracts, and exchange-traded futures and options, in ascending order of sophistication and of how badly they can go wrong.
What a farm can actually do about the price.
| Instrument | What it is | Who provides it | The catch |
|---|---|---|---|
| A forward contract | An agreement to deliver a stated tonnage at a stated price on a stated date | A grain merchant | You must deliver. In a failed year you may have to buy grain to meet it |
| A pool contract | The merchant sells your grain across a period and you take the average | A grain merchant or co-operative | You give up the decision, and the average is only ever average |
| A minimum price contract | A floor under the price, with some upside retained | A merchant, priced off an option | You pay for it, whether or not you need it |
| Euronext milling wheat futures | Exchange-traded contracts in 50-tonne lots, settled financially | An authorised broker | Margin calls, basis risk, and a genuine ability to lose more than you expected |
| Options on those futures | The right but not the obligation to trade at a price | An authorised broker | Premium cost, and complexity that has embarrassed larger businesses than a farm |
What this estate does, and what it does not.
On this site
- A fixed price for produce, paid by a consumer, delivered in kind
- A published seasonal ladder, where earlier is cheaper because earlier is riskier
- A shared-risk substitution policy agreed before payment
- Explaining, at length, how the real market works
Nowhere near this site
- Any cash-settled contract of any kind
- Any transferable position
- Any margin, leverage or clearing arrangement
- Any hedge sold to anybody, on any basis
- Any activity requiring a Part 4A permission under FSMA 2000
Why the plotting pages look a bit like a futures market and are not one.
Buying a crop before it is drilled, at a lower price than you would pay in May, is superficially the same shape as a forward position. The differences are structural.
It settles in goods and only in goods. It is not transferable, so there is no market in it. It is bought for consumption rather than gain. There is no cash-settlement option, no clearing house, no margin and no leverage. And the quantity you receive is fixed at purchase rather than varying with the harvest.
Remove any one of those and you would need an authorised firm to sell it. That is not a technicality; it is the difference between a farm shop and a commodities broker.
Hedging, questioned.
Like most arable farms of this size, it sells forward through a merchant for part of the crop and takes the spot price on the rest. That is ordinary practice and not remotely exotic.
No, and there would be no point. You have already fixed your price and your quantity, which means you have no price exposure to hedge.
Because the plotting pages sit next to a page called Futures, and a reader is entitled to know exactly how far that word is being stretched.
The consumer version.
Buying a crop before it is drilled, at a lower fixed price, delivered in kind.
Elsewhere on the estate.
/estate/the-money/
/estate/recording/
/estate/sitemap/
