TRACKING
QUESTIONS & ANSWERS
Q - What is tracking?
A - The plotting of the closing price of the London Liffe grain futures every trading day and taking an average of the prices over however many days within the track.
Q - What does it give me?
A - The guaranteed average feed wheat price for your location over the trading period.
Q - What about HGCA average as used by all the competition?
A - HGCA is a fictitious market and not an actual with strong tendencies to be a low comparable figure.
Q - Do you get any bonuses?
A - Pending variety/ quality that you offer against the tracking fund then bonuses are to be had. Tracking is purely on feed wheat spec.
Q - Do I have to nominate what wheat is to go against the tracker?
A - One month before the tracker is due to be moved or if an attractive premium is on offer for class one or two's then at any time you can nominate a variety and fix a premium.
Q - Can you give me a price for the fund at any time?
A - Yes, a value can be given over the phone at any stage.
Q - Can I freeze my fund if I am happy with its value?
A - Yes, we freeze the fund by taking its closing value on that day throughout the remaining tracking period
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Q - Can I freeze and then unfreeze?
A - No, once a tracker has been frozen then it is finished.
Q - Can I move my tracker into different months?
A - You can bring the tracker forward or take it backwards to suit your cashflow although it is best if this is planned in the beginning when setting up the fund.
Q - How does the moving work?
A - If you take a November tracker and do not want it to go until January then a monthly increment will be passed on. Likewise deducted if you bring a March tracker back to November.
Q - How involved do I have to be?
A - Not at all. The whole idea of a tracker is to let the market look after it as no one knows what is going to happen and we should not really interfere as this is the risk management side of the marketing where nobody can make a mistake.
Q - Is there a min/ max to offer the fund?
A - 50 tonnes is really the least amount you can track. Once again you should look at this on the outset and market 20 - 30% of the crop split over Nov/ Jan/ Mar to give the best spread of risk & cashflow.
Q - Is there any risk for Soufflet if they trade it wrong?
A - No, this is one of the attractions of this fund, no party is at risk for Soufflet simply sell on the market daily the amount of grain in the fund on that day so back to back all trade.
Q - When is the best time to start tracking?
A - Nobody knows that, and it makes very little difference in a long track position from entering one week/ month to another!
Q - How will this compare with other managed pools and group performances?
A - It has been proven that tracking as a form of return over a 10 year + period out-performs managed type funds where traders are trying to beat the market. Some years a managed fund may out-perform a tracker, however statistics say that over a greater period this is not the case.
Q - Why should I put some of my wheat on a tracker?
A - At present margins within farming are tight and marketing errors could seriously affect the ability to continue trading!
Q - What is the area discount for?
A - Futures are quoted on a delivered store basis and the ex farm variation takes account of the haulage element as ex farm prices vary from £3 - £5 discount to futures.
Q - How does the ex farm discount operate?
A - Using Autoroute we extract mileage from your farm to the nearest major consumption point e.g. Ipswich/ Tilbury etc. These are banded into £2.50 / £2.75 / £3.00 / £3.25 /£3.50 etc.
Q - What about my local mill?
A- Pending variety & quality, then the ex farm discount can be re-scaled if your wheat ends up in a more local consumption point.
Q - What information do I receive on my fund?
A - Throughout the year you will receive 10 bulletins giving the price and graphical movement of the futures over the preceding period.