Two new ventures have been publicised in the last few weeks that may help dairy farmers take some of the risk out of selling milk onto a volatile commodity market.  One has been launched by Woodcocks Dairy, a family dairy farm and milk buyer in Lancashire.  They have been established for a long time and have a good local reputation as fair milk buyers.

The Woodcocks scheme has been devised by FC Stone (futures traders) and Stephen Bradley, of website milkprices.com.  It has apparently been received very well by the farmers who have seen the details.

A second – and potentially more widely available – system has been launched by AOX Ltd, a company set up by farmer Richard Counsell.  His system has just been launched on a trial basis.  It is designed to be extremely simple, with the possible answers in any trade being only “Yes” or “No”.

In the AOX scheme you cannot lose more money than you actually place, and no physical deliveries will take place.  You are, in effect, betting (or “guessing”, or “estimating”) on a future price movement.  In this way you can ensure that at least some of your milk, wheat, beef sales, or fertiliser and feed purchases (for example) are at a particular price.  A wide range of commodities and markets are to be traded.

One other advantage of this scheme is that the charge for the system only applies if you profit on a deal.  It is to be set at a fixed percentage, so there are no extra costs if you “lose” on a deal.

Given the huge volatility in the milk market that we have seen of late, should you be using one or other of these markets?  One could argue that it is just betting, or gambling, and so that is a reason to avoid it.  But doing nothing is also gambling on the markets always going your way over the next few months.

I would not suggest that you should do any more than dip your toe in the water of these opportunities over the next few months.  And plainly you should enter into this sort of market as part of a considered strategy of the marketing of your outputs.  It cannot be a panacea for all your milk price problems, but it may take some of the future pain away.

If you wish to discuss further, please contact Charles at charlesholt@fcgaric.com