Besides pre-selling the new harvest in partial quantities, it is also important to secure the input materials for the new season, in this case fertilizer quantities, by making advance purchases. With this type of hedged selling and buying, you can secure as accurately as possible the targeted profit margin that you need for the new season.
Germany produces significantly better wheat than other European countries with 12.5%, sometimes 13%, protein. This wheat is exported to countries such as Saudi Arabia, Iran, Algeria and South Africa, and is predominantly exported through the ports of Hamburg and Rostock. Eastern Germany has what is possibly the most efficient grain production and selling system in the world. The large operations are located here, there is adequate precipitation, and yields are high. And with Rostock, you've got an overseas port where any quantity of product in any quality can be loaded in any shipping unit at any time. The approximately 5,000 operations in eastern Germany with, on average, more than 300ha of cultivation area per operation forward-sell the harvest in partial quantities in order to hedge prices. These operations often also have storage facilities and are therefore significantly more professional in their marketing than smaller operations in western Germany. However, it would also be worth it for these operations to engage in partial selling and advance selling. It is rather a question of mentality, of getting used to and utilising this more modern strategy of selling to the market. Nowhere in Europe is competition between traders greater than in Germany. For example, there are six/seven different buyers in Rostock that export themselves. Each farmer generally has four to five local agricultural traders that are in competition with one another, which means that he always has a choice when it comes to achieving the best price.
France is the most important wheat producer of the 28 member states of the EU but only produces normal breadmaking wheat with approximately 11% protein. France's main customers are North African countries. Exports are strongly geared towards the Atlantic port of Rouen, with all of the logistics oriented towards there. The Matif is the key commodity futures exchange.
In Poland, the agriculture sector mainly consist of small farms. Pricing is also based on the Matif. Poland has hardly any exports and only imports occasionally. It actually needs its own production to supply its own population. The grain produced in the country is collected by local agricultural traders and cooperatives.
This country produces purely fodder wheat, which is exported to other European countries. The mills import breadmaking wheat from Germany, which they mix with their own lower-quality wheat varieties to achieve the required baking qualities.
The most important export port for European grain is the Romanian port of Constanta on the Black Sea. While Hamburg and Rostock export around 2 to 2.5 million tonnes of grain each on an annual basis, Constanta handles over 11 million tonnes. All major international trading firms therefore have branches in Constanta. The grain comes, for example, from Austria, Serbia, Romania, and Hungary and is transported to Constanta on the Danube before being exported worldwide from there. The main importing countries in the Middle East can be reached at much cheaper freight costs from Constanta than from the northern seaports. In terms of handling volumes, the European ports are ranked as follows: Constanta – Rouen – Hamburg – Rostock.
In terms of grain exports, Europe's main competitors are Russia, the Ukraine, and Kazakhstan. At present, these three countries provide 27% of the volume of grain traded worldwide. Good harvests and favourable currency conditions in these countries place a damper on European exports.
A well-functioning logistics system naturally plays a key role when it comes to trading grain. Farmers in the German states of Saxony and Thuringia benefit, for example, from a railway line that was built by major Hamburg trading firms. Before that, grain from Saxony and Thuringia was transported by HGV to the seaports, or via ship along the Elbe. However, the Elbe only has sufficient water for cargo shipping for a few months of the year, which means that ships often cannot travel. Resourceful businesspeople in Hamburg then constructed a railway line from Pirna near Dresden to the Port of Hamburg. Grain is loaded in Pirna: oilseed rape, barley, wheat for export. Grain is now transported by train from Pirna to Hamburg on a daily basis while soya meal is transported from Hamburg to Pirna. The logistics costs have fallen by at least 30% due to this new railway connection, which means farmers in Saxony and Thuringia can obtain accordingly higher prices for their grain.