Soaring grain prices are prompting a rash of attempts by UK farmers to default on sales struck earlier the season at lower levels, a trader at a leading merchant has said, terming the practice "disgusting".
The trader said he was speaking to "one or two people a day" attempting to renege on contracts struck while prices were still well below the record ?04.00 ($323) a tonne at which London's near-term March futures contract closed on Thursday.
London's near-term lot fell to ?6.00 ($152) a tonne in June, before news of poor Canadian and Russian crops sparked the global grains rally.
"Farmers who have sold at ?50 a tonne are trying to get out of it," the trader, who spoke on condition of anonymity, told Agrimoney.com.
"It's disgusting. I thought we were better than that.
"On more than one occasion we have had to write legal letters to people explaining their position."
'Grey area'
Threats of default had been heightened by the snowy weather which hampered pick-ups in December.
"It created a grey area. Grain was not picked up when it was meant to be," a trader at a smaller practice said, who had required legal threats to secure a delayed pick-up in the Midlands.
"I don't see how a farmer can get out of a contract if it has been properly processed, although there can be ways and means [of defaulting] in some cases.
"I can see the temptation. If you had sold 500 tonnes at ?00 a tonne, that's a huge difference on what you would get today. That would be worth risking your friendship with a best mate over, let alone a dealer."
'Very hurt'
However, a large-scale northern grower said that he had heard of more attempts to default during the last price spike, since when many merchants have tightened up dealing practices.
Many, for instance, now scan contracts as they are sent to farmers as proof of postage, besides keeping phone records.
"Several [farmers] tried it with the 2007 crop and legal action was threatened," the grower said.
Nonetheless, many farmers were "feeling very hurt" at potentially low levels they looked set to receive, even from traders' grain pools.
"I do not think there will be many good results from merchants' pools for harvest 2010. One local merchant told me they have 40% of their usual tonnage for 2011 bought at levels sub-?30 a tonne."
The average price growers would receive this year was probably about ?30-140 a tonne.
"A price of ?20 a tonne was a very good one for a long time."
