Chickpea contract worries push prices up

22 Sep, 2016 06:46 AM
NSW Liverpool Plains farmer and former Grains Research and development Corporation chairman, Keith Perrett, inspects a waterlogged crop of chickpeas at
NSW Liverpool Plains farmer and former Grains Research and development Corporation chairman, Keith Perrett, inspects a waterlogged crop of chickpeas at "Dunmohr", Kelvin.

Chickpea prices in Australia have jumped $30 to $50 a tonne above overseas market values as farmers caught with soggy crops look for alternative grain supplies to fulfill their forward contract commitments.

Although the extent of damage to this year’s estimated 1 million hectare desi chickpea planting in NSW, Queensland and into South Australia is far from clear, wet weather this week could decide the fate of many more crops.

Grain traders began dealing with a run of contract washouts last week, mostly in NSW.

Most concern centres on disease issues in Central West NSW, while recent outbreaks and flooding in the North West and southern Queensland have also caused sudden yield losses on some holdings.

Croppers who are worried about filling their contracts are being urged to start talking to their agronomists and grain buyers now, rather than leaving a decision too long.

Growers are also being warned to be aware the late maturing crop might delay harvest and stall deliveries to export packers in the critical October-November period when grain should ideally be processed and shipped to the sub-continent.

Traders say it has not been too difficult at this stage for farmers to buy contracts back, or even look to neighbours to find enough alternative grain supplies to meet contract obligations.

Legally growers must fulfill their forward sale obligations, or buy contracts back from a trader who can find an alternative source of grain to meet the order.

Estimates within the trade suggest forward sales have, on average, accounted for about 40 per cent to 50pc of this year’s crop, although many were much more conservative.

Historically high prices and – until the past few weeks – a welcome run of good crop-growing winter rainfall events, fuelled a rush of forward contract sales based on area and tonnage commitments this year.

Forward price contracts in the past six months have been in the $750 to $1000 a tonne range, although most growers appear to have locked in below $900/t.

However, trading activity linked to contract retrievals has pushed the local market values to between $920/t and $960/t in northern NSW and the Darling Downs - up about $150/t in the past fortnight.

“Global markets are holding firm, but they’re not as strong as local values have been since the pressure to wash out contracts started to build,” said Nidera Australia chickpea trader, Rob Brearley.

“To wash out a contract you have to find the grain to fill that order from somewhere,” he said.

Mr Brearley estimated local markets were at least $30/t above export values.

Fortunately, despite rainy weather across Queensland this week, Central Queensland pulse crops were mostly “in good shape” and nearing harvest within weeks.

They were providing the basis for a supply and price floor in the market.

“Even the Darling Downs is pretty good despite wet conditions of late, but weather problems get more notable as you go south,” he said.

Persistent rain everywhere has made it hard for farmers to spray dense crops in time to halt the spread of fungal diseases ascochyta blight and botrytis.

Some growers fear losses of up to 75pc in heavy canopied plantings.

Flourishing weed infestations have also reduced yield expectations, while flooding has lately become a problem in some paddocks in the Namoi, Gwydir and Macintyre valleys and south western Queensland.

Toowoomba-based advisor with grower advisory service ICM, Matthew Leeson, said traders were proving “quite approachable and reasonable” about the weather problems and contract concerns.

“Get your agronomist’s opinion on the yield prospects and start communicating those thoughts with your buyer,” he said.

Growers also needed to be extra alert to the window during which harvest deliveries needed to be made.

Many crops could be maturing late and rain at harvest could cause further receival delays and packing bottlenecks for exporters.

While most growers his firm dealt with from Central Queensland to Victoria had been modest with forward sales strategies, he said bullish markets had encouraged more contracts to be locked in than normal.

Faba beans, which were priced at $280t this week (against $400 last season), had seen much less forward price interest.

Pulse Australia chairman, Peter Wilson, said while yields would be well down in some areas, predictions of a 1.6m tonne crop may still be possible, given some planting still continued in August.

“It’s hard to say what the weather will do, but I think we’ll still see a very big crop,” he said.

“Having plants standing in water is not good, but varieties are a lot more resilient today than a decade ago - we saw crops survive waterlogging in south western Queensland last year,” he said.

“Farmers have better tools to quickly deal with spraying and harvesting needs much faster than ever before.”

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Andrew Marshall

Andrew Marshall

is the national agribusiness writer for Fairfax Agricultural Media
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Jock Munro
23/09/2016 4:46:03 AM

Forward selling grain is always a risky proposition and we are now seeing further evidence of that fact. In a forward contract the grower also carries all of the risk.
25/09/2016 6:37:16 AM

Correct Jock. Selling what you don't already have is the biggest con ever introduced to farmers. With little or no hedging opportunities for chick peas out of Australia, forward selling is as risky as betting on rainfall.


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