Navigating grain markets – a task that combines intel gathering, confidence in decision making, agility in approach, and much more. And while some growers may be comfortable managing this themselves plus the associated risk factors, for others, this is where the experts step in.

From trackers to pools, there’s a host of established marketing products available, depending on a grower’s objectives. But according to ADM Agriculture’s Freddie Humfrey, a desire to do better and offer an alternative is what led the company to develop its Wheat and Barley Fund – a strategy powered by a rule-based algorithm.

Furthermore, since its launch in 2021, the fund hasn’t had one losing movement period compared with the market, highlights Freddie, head of grain trading. “Developed by our in-house team, being an algorithm, it removes any emotion from grain marketing decision-making with results that speak for themselves.

“During testing, it outperformed the market tracker 62% of the time, by an average 8%. When it underperformed it did so by just 2%, meaning the reward outweighs the risk.”

How it works

The algorithm powering the fund is fed by London Wheat Futures to provide an objective, clear valuation methodology, continues Freddie. “By pulling on 20 years of historical pricing data, this assists the tool in its assumptions and spotting trends,” he says.

Freddie points out that there are three key aspects of its function, the most critical being price action – so ascertaining whether the market trend is going up or down. Then, it undertakes a technical analysis of market moves to predict how much it may fluctuate.

The final aspect is mathematical seasonality, to indicate when the optimum time to sell is during a cropping cycle. “For example, history suggests you tend to see prices drop during harvest due to there being ample supply.

“Equally, it’s understanding when there’s likely to be an upside. This isn’t concerned with worrying about why, it’s more identifying what can be done about it,” he explains.

Risk management

Having been in place to support ADM’s trading team for the past four years, Freddie believes the fund should offer a better price than a tracker.

“Markets are emotionally difficult to manage, therefore making clear, objective decisions can be challenging. Even if you don’t like the markets and what they’re doing, this system avoids the emotional pitfalls and sells regardless, thus managing risk for the grower.

“It’s consistent and outperforms both the market and the average farmer seller,” he states. “It’s ADM’s lowest risk, best return product.”

Movement periods

The Wheat and Barley Fund is split into four movement periods with fixed payment dates following each: harvest, October-December, January-March and April-June. For wheat, the fund is open for new contracts until 19 December. For barley, it’s open until 31 March.

“The farmer selects which period they want to be involved with and the grain is then marketed.  With no losing year since going live, we hope growers perceive this as an opportunity to approach things differently, during an increasingly difficult global grain market,” concludes Freddie.

To find out more, contact an ADM Agriculture farm trader today or email enquiries.adm.agriculture@adm.com