Port premiums benefit growers

11 Nov, 2014 01:00 AM
Comments
22
 
Marketers are keen to meet shipping slot obligations, rather than risk forgoing the upfront costs

ALONG with international prices moving the right way in recent weeks, Australian growers may also benefit from strong competition at ports.

As marketers look to fulfil shipping slot and rail arrangement obligations, premiums of up to $60 a tonne have been paid for prime shipping slots in South Australia, while there have also been healthy prices paid in Western Australia, according to ProFarmer analyst Hannah Janson.

She said while some of this money was reimbursed upon execution, it was not refunded if the slot was not used.

“What we see is the cost of not doing business - marketers are keen to meet these shipping slot obligations, rather than risk forgoing the upfront cost,” Ms Janson said.

And while there is not the same premium for shipping slots on the east coast, she said there were also technical factors encouraging marketers to accumulate grain.

“Some merchants may have take or pay rail arrangements that need to be paid for even if they are not used. This can encourage buyers to enter the market when they otherwise may not have.”

Her views were backed up by Emerald Grain acting group general manager of trading, marketing, origination and communications Tom Howard.

“If you hold one of the early harvest slots for a premium, every marketer likes to see them covered.”

Ms Janson said growers could make sense of what was happening and what opportunities it presented by understanding the timeframes of the shipping slots in their port zone, whether there was a heavy front end export program in their port zone and knowing where the premiums had been paid which traders should be less willing to default on.

Along with this, an understanding of the surplus or deficit position in their state, based on shipping stem bookings and normal domestic use against projected production would also provide a good tool for helping make sense of the market.

In terms of the international market, Mr Howard said prices had been rallying in the past fortnight.

“We’ve seen logistics issues and US farmers holding crop push oilseed values up, but there has been a lift right across the board.”

“Wheat has bounced back well to above US500 cents a bushel on the Chicago futures market and at these values it might represent an opportunity for Aussie growers that haven’t priced some grain to do so.”

Mr Howard said initially the price gains were based on modest weather concerns surrounding the Russian and American winter crops, but had been intensified by technical buying from the trade.

Locally, he said the northern harvest on the east coast was in full swing, with below average yields but good quality.

“These crops never were set up for a big year, so we haven’t run into large scale problems with quality, there seems to be a good percentage of hard wheat there.”

In terms of a national wheat crop, he said estimates still varied between 22 and 24 million tonnes.

“It’s potentially below average, but not massively so, the disappointment lies in the fact so much of the country looked so good early in the year.”

He said basis levels in Australia remained resilient, but said it would be interesting to see where it would go once more grower selling kicked in.

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FarmOnline
Gregor Heard

Gregor Heard

is the national grains writer for Fairfax Agricultural Media
Date: Newest first | Oldest first

READER COMMENTS

Deregul8
11/11/2014 5:34:08 AM

Kind of puts to lies the wild claims of some seriously deluded posters on this forum as to the benefits of competition for farmers, and the unprecedented demand for our high quality produce. The basis don't lie. Thankfully this minority does not represent the mindset of the modern Australian farmer who is keen to better himself and take full advantage of the commercial opportunities ahead of them. There is good money to be made.
LTF
11/11/2014 8:32:36 AM

D8 your propaganda is not supported by the facts. The facts are that the vast majority do not believe the current system is better for them than the Single Desk was. This was shown by this very newspaper only a matter of weeks ago.
argis
11/11/2014 8:35:10 AM

Deregul8 I am sure you are familiar with the old adage that while "figures don't lie liars do figure".
cmt
11/11/2014 8:47:51 AM

D8 no matter how much propaganda you push out your credibility is so low from your past inaccuracies, nothing you say now can be believed. You are kind to give us the opportunity to carry on the Single Desk debate however. Under SD we had quality control systems right through to our end user customers with strong feed back links to the farm gate. Now your wheat is mixed at the traders' discretion and all you do is dump bulk commodity onto a market. It gets lost in space with multiple traders buying and selling it on its way to end users and it loses its identity. That a farce is not marketing.
Independent Farmer
11/11/2014 9:32:36 AM

The problem with farmers is the lure of going with the mob is irresistible, even when the mob has been consistantly wrong. Recent examples of farmers getting it wrong are 1. support for a single desk marketing system that robbed them of the freedom to market their product as they desire. 2. support for a reserve price scheme that nearly brought Australia to its knees and ruined the global wool industry. 3. support for man-made global warming, even when there is an 18 year pause of warming and CO2 is a benifit to plants.
cmt
11/11/2014 1:11:26 PM

@Independent Farmer. Firstly, dumping bulk commodity into the hands of international traders is not marketing. Secondly, do not blame wheat farmers for the stupidity of the Grazier fraternity with the pathetic mismanagement of the Wool Price Scheme. Thirdly, where is the connection between wheat growers and the global warming nut jobs. If you call your comments logical and relevant its back to the drawing board for you my friend.
mike hayes
11/11/2014 1:58:44 PM

@Independent Farmer. You say SD robbed you of the freedom to market your grain as you desire. No one stopped you from marketing in Australia from 1988 on. No one ever stopped you from hedging your crop independently. Do you have enough wheat to fill a bulk ship going to an overseas end user with the spread of grades required? If not how could you do your own export marketing? How do you do it now? You don't. You just hawk tiny bulk parcels in competition with 25k others to mega traders who have no commitment to your wheat over that from Romania, Argentina or anywhere else. Its all about $'s.
PayAttention
11/11/2014 3:26:27 PM

Stop fibbing Mike - I don't need enough grain to fill my own vessel. I can ship containers if I wish, and it matters not to me if the large traders sell it elsewhere after I sell to them. The SD absolutely stopped us marketing our own grain. Furthermore, since we couldn't lock in a price we had no ability to hedge anything.
Independent Farmer
11/11/2014 4:46:10 PM

The difference is the multitute of buyers are creating competition which is expressing itself in consistantly higher prices. My grain growing business is more profitable than it has ever been and I farmed under the single desk for 2 decades. I can't believe some farmers still after all the positive evidence want compulsory aquisition of grain, you guys are like followers of some extreme religion, just not the violent part I hope.
GFA
12/11/2014 6:17:48 AM

PayAttention and Independent farmer, you are both incorrect in fact and your assumptions can not be proven because you will never have the two systems operating in parallel. While you may be seeing more buyers now, it does not mean they were never there. The AWB was dealing with them on farmers' behalf. What we now have is an extra 25k of Aussie sellers with same number of buyers. Logic says you are wrong and the fact that USA & EU both need to heavily subsidize their grain growers for them to survive with deregulation is the crunch point. Remind yourself that you are a minority view also.
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