Rain to decide marketing activity

25 Apr, 2014 02:00 AM
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Albany Zone growers have been more aggressive than those in other zones.

LOCAL grain values have been well supported in the last few weeks.

But its continuation will all depend on the weather.

Now that seeding is here, growers have started to sit up and take notice, with many of them locking in grain and becoming acutely aware of their financial goals for the season.

MarketAg independent grain marketing adviser Kim Povey said WA growers had started to become very clear about their business goals when it came to profit targets and grain prices this season.

He said clients had started to gain a better understanding of their costs of production and targets for forward sales and when $300 a tonne FIS for new crop wheat was hit in early March, there was a low volume of grain sold throughout the State.

But with levels reaching $320/t in recent weeks there had been another flurry of sales.

"Some people in agribusiness think farmers make huge profits at $300/t," Mr Povey said.

"When looking at long-term average yields the margin is fair, but not huge."

He went on to say the outlook for wheat prices in the new year was relatively bearish but political unrest in Ukraine and the continued dry conditions experienced in the USA's Southern Plains had pushed prices $40/t higher since the start of the year.

"The other contributing factor has been a very strong local basis," Mr Povey said.

"In fact, the basis which is built into wheat prices is the strongest it has ever been for this time of the year since the 2008 wheat market deregulation."

He said grain merchants throughout the country had started to compete more fiercely than ever for farmers' grain which was great news for growers in WA.

Grain Brokers Australia grain broker Nic Sewell agreed with Mr Povey by saying that most growers were pretty content with the amount of forward sales they'd participated in to date considering the lack of immediate rainfall on the horizon.

He said prices would need to rise to the next target or significant rain would need to fall from the sky (whichever came first) before WA growers would start the next round of market activity

Mr Sewell said those growers who were keen forward-sellers had already locked away about 10 to 20 per cent of their new season crop off the back of strong grain prices a couple of weeks ago, while those who were more cautious would be more than happy to wait for some rain.

"Albany Zone growers have been more aggressive than those in other zones," he said.

"It stems from the confidence boost given by last year's record season.

"Prices appear to be looking for an excuse to retreat with large net long positions across all commodities in the funds."

Mr Sewell also pointed to the escalating Ukrainian and Russian political situation and the significant and continuing deterioration of US winter wheat conditions.

"The bulls are being well fed which will keep pricing around the 700 cents a bushel level," he said.

"Old season pricing has benefited in recent weeks with a fresh round of shipping auctions taking place.

"Basis has also strengthened from about 10c/bu-80c/bu in a two week period."

Mr Sewell also said WA growers would benefit from the strength of the new season basis which was uncharacteristically strong for this time of the year at 80c.

"It's very surprising considering how big the 2013 harvest was throughout WA and the potential carry out into 2014."

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