Ian Pye Northern Farming Conference Hexham Thank you to the - - PowerPoint PPT Presentation

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Oct 06, 2022 469 likes •813 views

PRICE RISK MANAGEMENT FOR THE UK DAIRY SECTOR - COWS LOOKING OVER THE HEDGE Ian Pye Northern Farming Conference Hexham Thank you to the Harold Cowburn Trust & Nuffield Farming Scholarship IAN PYE THE WHY Involved with several

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PRICE RISK MANAGEMENT FOR THE UK DAIRY SECTOR - COWS LOOKING OVER THE HEDGE

Ian Pye Northern Farming Conference Hexham

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Thank you to the Harold Cowburn Trust & Nuffield Farming Scholarship

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IAN PYE

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THE WHY

Involved with several boards

including NFU

Externalities beyond my

control

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PRICE RISK MANAGEMENT = MANAGING PRICE VOLATILITY

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MY JOURNEY INTO USING THE MARKETS!

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RISK MANAGEMENT FOR DAIRYING?

Using financial

tools to provide long term business stability

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EUCOLAIT – SEEING THE PROBLEM

Financial Problems High Prices- product substitution Confidence in the supply chain

eroded

Investment, R&D and innovation

become limited

Loss of skills

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EU FARMING UNIONS AND MEP‟S

SEE A STORM IS GATHERING – BUT WHY DO WE NEED THIS!

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EU EXPANSION- MARC HAVERMAN

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EXPANSION IN IRELAND

1% excess in

production = 14% change in market price

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THIS IS HOW WE CURRENTLY NEGOTIATE MILK PRICE

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….OR EVEN LIKE THIS!! #SOSDAIRY

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WHAT A BREATH OF FRESH AIR! “DAIRY FARMERS LOOSING MONEY IS THEIR CHOICE”

CARL BABLER PRINCIPAL, ATTENBABLER MARCH 2012

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USA

Unprotected producers

lost $14 Billion in 2009

Cyclical behavior of

milk market

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THE HISTORY OF THE FUTURE

Hershey Chocolate manufacturer

exposed to price peaks

Could trade futures on all other

inputs

Protect menu price

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DAIRY FARMERS OF AMERICA

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DFA- VOLATILITY IS A DIRTY WORD!

 Contracts to match producer cheese,

milk (class 3)

Advancing into Milk-Feed Margin Volume is limited per producer & Credit

Checked

Contract 1-24 months ahead Min 9000l /month

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THE „VANILLA‟ HEDGE

Establish risk level in business Purchase an Option that suits Now have the Right to Sell this

Futures contract at known time and cost

Minimum Price Insurance for Dummies!

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HEINS DAIRY

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NIALLS DAIRY - MANAGING RISK

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WHAT DOES THIS ALL MEAN TO ME- A Humble Dairy Farmer

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UK PRICE VOLATILITY

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MILK PRICE HAS SEASONAL BEHAVIOR

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FUTURES MILK PRICE

CONTRA SEASONAL BEHAVIOR

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UK EXPOSURE

Dairy Co encouraging exports NFU recently visiting Japan New manufacturing facilities coming

n line

Diary buyers consolidating

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EU DAIRY FUTURES

European manufacturers want to

trade

The Exchange infrastructure is

already in place

Where are the EU farmers……?

…..Waiting for the trough?

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UK SITUATION:

Manufacturer / dairies take the lead Farmers need to understand their own

exposure

Dairies need to co-ordinate and take a

proactive approach

Need has to be understood by Unions and

Government

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SUMMARY

THE MARKET WILL BECOME MORE

UNSTABLE POST QUOTA

VOLATILITY WILL AFFECT THE

FUTURE OF THE SECTOR

DAIRY‟S THAT USE RISK

MANAGEMENT CAN ENSURE THEIR STABILITY

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THANK YOU

ianrpye@aol.com 07754852600