An Introduction to Salisbury Cereals Ltd
Salisbury Cereals Ltd is a private limited company made up of twenty four like-minded farmers and was established in 1970 with the aim of gaining market advantage through the collective sale of their crops to their mutual benefit.
By contract, it employs the services of an experienced crop marketing specialist who trades the combinable crops of its members, collectively.
The present board of six directors, who are elected from the membership, oversees the running of the company and ensures the equitable distribution of sales receipts to members.
The company employs no full time staff, with administration being handled by the office of one of its larger members.
How Salisbury Cereals Ltd works
As a co-operative marketing group, Salisbury Cereals has traditionally only marketed those crops stored on its members’ farms. More recently, however, members with some of their grain stored in central storage co-operatives have been able to opt for that grain to be marketed through SCL, too.
Members commit 100% of their farm-stored cereals to the company, other than seed and that consumed by their own livestock.
At harvest and shortly after, each member submits samples of all stored crops to SCL. These are then sent for analysis and from the results their potential is ascertained, thus allowing the grain to be marketed with crops of similar specification from other members.
It is the collective marketing of members’ grain in lots sized to suit the buyer, coupled with SCL’s reputation for delivering reliably to the specification contracted, that allows it to achieve that extra price advantage for its members.
Information, Storage Requirements and Cash Flow
Members are required to complete sowing returns on request each November, showing the areas of autumn varieties sown as well as their drilling intentions for the spring. These will then be confirmed in April with an estimate of expected yields and the preferred month of movement. This allows the member to set the timing of the receipt of his first payments.
As soon as possible after harvest a grain stock form is completed by each member listing accurately the tonnage of each variety stored. This is vital information necessary for the marketing operation to succeed.
Allocation of supply
At the end of each month during the supply campaign, members holding grain of a specification suitable to meet contracts which are to be supplied during the following month may be notified that they should release a given tonnage to a named buyer. Allocation is made as according to SCL's contractual needs and the member's previously stated requirements.
The buyer’s haulier will contact the member and loading will be arranged between them. When the contract is complete, the supplying member will receive the first payment, (in the region of 80%) from Salisbury Cereals Ltd before the end of the month following the month of loading.
In order to minimise market risk, all wheat of whatever quality enters a "feed wheat pool" and the supplying member ultimately will be paid the average feed price achieved for that season plus any premium that the grower's own quality may achieve above feed value at the time of delivery.
The spring malting barley pool has a similar "feed value" base from which first payments are made. The total premium achieved on all SCL malting contracts is then divided across the tonnage that has achieved malting quality and is paid to the supplying members accordingly.
Any deductions against contract specification made by the buyer at intake are set against the individual member's account, as are the cost of any rejections.
The wheat and the barley pools run from October, when the initial payment level is set, along with the monthly storage increment.
For carrying grain in store from November onwards, the member is rewarded with a small increment per month to cover the cost of money etc. From this initial payment, the standard marketing charge (£1.70 per tonne at time of writing) is deducted and the company covers all transactions with “bad debt” indemnity requiring 20p/tonne as a premium.
Thus it may be seen that at £1.90 per tonne, crops marketed through SCL carry significantly lower charges than any other marketing organisation operating locally. The statutory HGCA levy and the weighbridge charge are also deducted at this stage.
At the end of the campaign, the board allocates any remaining pool “kitty” equitably to the members who have supplied that pool with grain. Wheat pool payments are usually completed in July and the spring barley pool in May, or June.
Where the company markets grain that is not in a pool, say, because the member wishes early sale for storage or cash flow reasons, then he/she will receive the full realisation value in the month following delivery, but after normal charges and deductions.. However, the market security associated with pooling will not be achieved in these cases.
Pools may be run in other crops marketed by SCL, such as milling oats, as long as there is sufficient volume and a clear advantage in doing so in a given season.
As a company, we believe that there are very clear advantages in belonging to Salisbury Cereals Ltd, year on year, as the company’s record of success in achieving prices consistently above the average has shown. We do not set out to achieve “high prices” and we certainly avoid low ones. It is our aim to build a good average that should, in most seasons, exceed what one might expect as an individual.
To join Salisbury Cereals one buys a share for £1.
Summary of the advantages of marketing through Salisbury Cereals Ltd
Consistently "better than average" price achievement through experienced marketing and proven "pooling"
Maximum return of revenue to the member- SCL only exists to serve its members' businesses.
Market risk management through long-term sales strategies.
Enhanced attraction to buyers of volume sales and reliable supplies.
Very low cost of sales to members through minimal overheads.
Bargain credit insurance not available to individual farmers.
Security of a co-operative's support in ensuring that supply cover is usually available in the event of rejections.