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  • Smarter than the market

Smarter than the market

Posted on 20/06/2014

There is an age old saying that “nobody beats the market”, no matter how experienced or smart you may be. This saying holds true in any market, whether it’s the FTSE 100 or the potato industry.

Only six months ago the markets were trading potato future contracts above 200 Euros/Tn but now we see that prices have come down to less than 70 Euros/Tn (ex-farm). Huge fluctuations such as this have a big impact on contracted volumes and processors must manage these risks throughout the supply chain, which leads to inefficiencies, not to mention financial challenges.

Externally, what we find is that during a market rise there are many who want to take a long term view, however as soon as the market falls we find that some of those begin to have 'itchy feet'. As Warren Buffet once said: "It's only when the tide recedes, you find out who has been swimming naked".

Many customers frequently ask us whether it's worth taking a long position, and if so, the duration. The honest answer is that there is never a right or a wrong time, you just have to make a judgment call based on the assessment of the information you have at any given time. We have to realise the local and the macro factors shaping the world futures markets, such as rising global populations, fluctuating weather patterns and reduction of arable land. If historical data is anything to go by then this clearly shows two market rises in the last four years alone. What is important is that once a judgment call is made, agreements are honoured by all parties, managing rewards and risks collectively. 

I trust you will find the Q2 newsletter informative and I am always happy to receive any feedback/suggestions/ideas you may have, so please feel free to get in touch with me directly at m.essa@aviko.com or through our customer service centre at ukhelpdesk@aviko.com

Mohammed Essa

General Manager
Aviko UKI