Growers cautious on forward grain sales

02 Jul, 2015 01:00 AM
Comments
9
 
While it was a lovely rain and it got us out of jail, it's still a number's game

DESPITE last week's rain, growers are still cautious about taking a forward marketing stance in the current price climate.

Grain marketers are reporting some action in the northern Geraldton and southern Esperance port zones following good summer rains and high June rainfalls, but little movement elsewhere.

MarketAg director Richard Vincent said many growers were 50-70 per cent down on their June average rainfall and this was holding some back.

"While it was a lovely rain and it got us out of jail, it's still a number's game and we still need more to make it happen," Mr Vincent said.

"People are conservative on their forward sales until prices rise above $300 to justify the production risk.

"It's a really mixed bag, for some they've managed to get their crop out of the ground and fully germinated, whereas there's significant sections in the central and eastern areas that didn't fully germinate and the potential of those crops was reduced with an effective seeding date well into June.

"The timing of the rain couldn't have been better to put confidence back into the Wheatbelt.

"Hopefully wheat prices can hang on and spring rains are timely."

Mr Vincent said much of the market activity was in the canola market, and some growers had also locked in barley.

"The rally in canola prices is very welcome with the market trading $85 per tonne higher than at the start of the year," he said.

"Most of the change is attributable to rallying Canadian canola prices as they face some production issues in the Western Prairies.

"The market is thinking Canadian production may drop two million tonnes from earlier expectations, to 13mt.

"Either way, WA growers are being presented with profitable canola prices of $585 a tonne free in store, assuming average yield can be attained.

"Compared to the $500 budgeted, it has been an impressive rally."

Mr Vincent said despite this attractive pricing, the tendency to sell canola was still limited to more reliable rainfall areas and those with solid crop establishment.

At this point in the season, he said the overall level of canola sold in WA was low.

"Sales have been predominantly in the Esperance zone and parts of Albany," he said.

"The staggered germination and high production risk sees other zones less inclined to sell."

Mr Vincent said moves to secure barley could be attributed to mainstream malt varieties hovering at about the $300 mark and feed barley sitting near $275/t.

He said uncertain market futures, with the Chinese demand for feed barley never guaranteed, meant there was also motivation to lock in barley at current prices.

Grain Brokers Australia representative Nic Sewell said optimism was much higher across WA following the June rain, but many growers had the 2014 and 2013 seasons in mind as they considered their forward contracts.

He said an unreliable market in recent weeks was also playing on people's thoughts.

"We've seen quite a bullish market in the past couple of weeks which would have encouraged people to get a bit of cover," Mr Sewell said.

"We've just hit that $315 mark with wheat which is traditionally a good selling point for wheat, but last year we had a good year and globally wheat production was very strong and we still experienced pricing over $300.

"This year it's not looking as great for WA, there's still a lot of El Nino concerns in eastern Australia, despite them having had a bit of rain now, the United States is getting hammered with rain at the moment so that's really affecting their harvest while Europe and Canada are dry."

Mr Sewell said talk of the June rain being a "game changer" was far from the truth for areas outside of the north of Geraldton and the South Coast.

He warned as the season progressed and the true potential of the WA crop came to light, prices were set to change and for some commodities, such as canola, the prices might be worth the wait.

"The canola has probably been driven by the Canadian weather, but I think there's fear driving the market now," he said.

"Canola has been the one that has struggled locally this year, the plantings are down and yields are down so if they're not expecting a big crop over east that will transfer to more canola interest over here.

"Soybean plantings have been a real big one in the US and all of this rain they're getting means they can't quite finish their soybean plantings so there might be reduced plantings which will help the canola price here.

"Once people get to the flowering stage you'll probably see an uptake in forward contracts for canola."

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READER COMMENTS

Deregul8
2/07/2015 4:24:47 PM, on Farm Weekly

The current entrenched weather pattern has all growers worried. You'd be a game man to over extend your marketing with deliverables. The reality is the Australian situation may well provide the next leg up in International markets. Balance sheets will be tight globally. Basis don't lie.
Zero till
5/07/2015 7:44:09 PM, on The Land

As Jock will still remind us. We had a powerful yet beautiful thing that was the single desk that would of hedged our crop, mowed the lawn and tucked us in at night. I couldn't help myself!
Jock Munro
6/07/2015 7:48:39 PM, on The Land

Zero Till, Thank you for promoting the worth of the single desk and a little humour can go a long way.
Newageafrmer
7/07/2015 7:50:56 AM, on The Land

@zerotill & Jock Munro, growers can still hedge and protect prices themselves through many ways if you decide to get off your back side without the single desk. Just saying
Ken
20/07/2015 10:51:11 AM, on The Land

If I want to bet on the horses I go to the races, at least I don't have to wait half a year to find out how much money I've lost like grain punters do.
Zero till
22/07/2015 7:50:44 PM, on The Land

ken at least I don't have to keep sheep alive feeding them expensive grain over a hot dry summer like graziers do!
Jock Munro
24/07/2015 1:38:23 PM, on North Queensland Register

Yes newagefarmer and at considerable risk to the individual- old idea and old risk issues. The national pool did these things at very little risk to the grower and at negligible cost. Be careful that your broker does not set you up for a fall.
Jock Munro
24/07/2015 4:54:38 PM, on North Queensland Register

Yes newagefarmer and at considerable risk to the individual- old idea and old risk issues. The national pool did these things at very little risk to the grower and at negligible cost. Be careful that your broker does not set you up for a fall.
Ken
11/08/2015 8:58:23 AM, on The Land

Zero Dill, I assume you can't count, sadly the gross margins for a well run stock enterprise is seriously out performing grain in the grain belt. Grain production in Oz is a sunset industry while the boofheads manage it.

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