The Grain Game David Jones, Rob Austin & Gaina Dunsire Decision making - the risks and rewards for farmers in commodities market trading www.leafuk.org | Twitter: @LEAF_Farming @FaceOnline| www.face-online.org.uk

Objectives of the game Each team must decide how much of their wheat harvest they want to sell and when There are 8 given periods when you can sell e.g. The team which makes the most profit wins! January 2018 April 2018 August (crop harvest) October December February 2019 June

Futures Markets First you need to make some calculations about your ‘future’ wheat harvest (in August); 1) How much do you expect to harvest? 115 hectares (ha) 9 tonnes per ha = ? 2) How many lorry loads will you have in total? The wheat must be sold in full lorry loads (why?!) Each lorry can hold up to 29 tonnes. 3) You must cover the cost of production. What are a) fixed b) variable costs on a farm? The cost of production overall is £150/t – this is the minimum price you can sell at to cover your costs. However…… Until harvest begins, there is a lot of uncertainty and speculation about the quantity and quality of the wheat. An individual farmer cannot influence the price – wheat is a global commodity. Sometimes farmers make very little profit. ANSWERS 1) 1035t (NB reduces during game to 812t due to wet weather) 2) 35.7 (36) lorries 3) Seed, labour, fuel, pesticide/herbicide/fungicide, fertiliser, plant hire, & storage, drying etc Each team is given lorry tokens or small containers of wheat representing their lorry-loads of wheat.

Market information For each of the 8 periods when you can sell your wheat, you will be offered a price and some advice on the market from different sources. NB some sources are more reliable than others! Grain Merchants: Good quality up-to-date information Make more money from high prices Government reports: Facts and predictions based on evidence Slow to respond to new information Blogs/social media: Recent/live information Opinion Other farmers: Personal experience Magazines, newspapers: Report facts, background history Sensationalise events to create a story

The rules of decision-making As a group you must decide when and how much to sell. You can sell as much, or as little, as you want at any one time. There are no rules when during the year to sell. You could choose to sell it all in the last or first period! You must take the risk and sell when you think the time is right. The only rule is that when you sell, you sell in multiples of 29t as this is is how much you can get on a lorry. If your group takes too long to make a decision – you will be given a one minute warning – don’t lose your opportunity to sell!

Record Card – example of first round data Month Offered Tonnes available Tonnes Sold Value of contract Balance January 2018    160.00 1035  3 x 29 = 87  87 x 160 = 13,920  13,920 April 2018 August 2018 October 2018 December 2018 February 2019 April 2019 June 2019 TOTAL COSTS 150/t x 1035 = £16,65 00.00. OVERALL PROFIT 2019 = Good luck!

Suggested pre-task knowledge - 1 Key vocabulary hectare, yield, tonne, cleaned wheat, milling, feed wheat, spring wheat/winter wheat, global commodity. Who are the world’s top 10 wheat producers? – can you guess the order?! USA Canada Germany Pakistan France China Ukraine Australia Russia India https://www.worldatlas.com/articles/top-wheat-producing-countries.html 1. China 2. India 3. Russia 4.USA 5.France 6.Canada 7.Germany 8.Pakistan 9. Australia 10. Ukraine

Suggested pre-task knowledge - 2 What influences the price of wheat? The price is determined by worldwide supply and demand but based on the following; Supply - how many hectares are planted with crops around the world. Supply – the quality of the crops around the world. Supply – is the long term weather forecast favourable for those crops? Supply- is a country holding on to stocks for political reasons? Supply – are stocks freely shipped (port blockades)? Demand – do people want to buy the quality available? Demand – have people got the money to buy? Demand- are crops need for other uses NOT food e.g. bio ethanol? These are called crop fundamentals. What also affects the price is people or organisations speculating. If for example the United States Government predict a poor harvest because of an unfavourable weather forecast, buyers may become concerned about supply and are willing to pay more. Students could be asked for their own ideas first