When to sell: market patterns emerge

26 Sep, 2014 02:00 AM
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A clearer picture is emerging and farmers can take advantage of optimal selling times

THE Australian grains sector is maturing following deregulation of the wheat industry, according to industry analyst Malcolm Bartholomaeus, and a pattern is beginning to emerge in terms of marketing opportunities.

Speaking at a Grains Research and Development Corporation (GRDC) farm business update in Horsham, Victoria, this month, Mr Bartholomaeus said during the first couple of years of an open market, it was hard to predict what would happen in terms of grain selling patterns.

Now, however, he says a clearer picture is emerging and farmers can take advantage of optimal selling times for their grain.

Interestingly, Mr Bartholomaeus said it is not a one-size-fits-all approach, saying different commodities have different times where pricing tends to be at its peak.

The 'sweet spot' for selling wheat

In terms of Australia’s most widely grown crop - wheat - Mr Bartholomaeus said the best time to sell was early in the New Year.

“The sweet spot for wheat is from January to April in most years, as a whole.

“Within that, some years you get really strong prices at harvest for some of the higher protein grains, as exporters and domestic users compete for limited supplies, however, overall the best time to sell is before Easter, as there is still some northern hemisphere production risk.

Mr Bartholomaeus said massive spikes were possible later in the year, but this relied on a serious production issue, such as during the 2010 drought in Russia, and the 2012 North American drought.

“You could have a punt on such an event occurring, but if it doesn’t happen you’re likely to see prices come down, so I don’t think it’s a particularly sound marketing strategy, given there are significant storage and interest costs in doing so, meaning your price needs to be a lot better than what it was earlier in the year.”

He said the lower grade wheats tended to be discounted off the header, but added these discounts normally narrowed in the new year.

“This makes them a very low risk commodity to hold, whether in warehousing or in on-farm storage.”

Storage opportunities

Mr Bartholomaeus said farmers were becoming more confident in using on-farm storage as a means of exploring blending opportunities.

“I see blending as the key opportunity you get from having on-farm storage, but of course it needs to be done carefully.”

In terms of feed barley, Mr Bartholomaeus said the best selling times were immediately leading into harvest and post harvest.

“We tend to see a quite sharp dip in feed values at harvest time, it’s rare to see the best price for the year off the header.”

He said prices then tended to rally, usually moving above harvest values at least at some stage, especially in Victoria.

This means he sees feed barley as another storage opportunity for those with access to domestic markets.

“Holding feed barley on farm for domestic end users can deliver good returns.”

For this year, however, he said feed barley prices were still strong compared to last year which meant forward contracting now could be an option now for those comfortable with their production risk.

“It’s unlikely we’ll see harvest prices rise above what we see now.”

Different grain dynamics

“With malt, you often see the best prices prior to harvest or even off the header, the malt-to-feed spread usually closes right up once harvest is finished,” Mr Bartholomaeus said.

For canola, he said, the same counter-seasonal premiums that make wheat prices generally attractive in the first half of the year applied, only at a different time.

“The key time for canola is June to August, when the northern hemisphere soybean crop is not assured.

“The area is planted, but the crop isn’t secure, the market then drops away once these yields are locked in as the crop develops.”

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FarmOnline
Gregor Heard

Gregor Heard

is the national grains writer for Fairfax Agricultural Media
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READER COMMENTS

wtf
26/09/2014 3:42:00 AM

So by pretending supply and demand actually set the world price we are taking control of our own future hey grain traders? what a load of rot. This is designed to get your grain the cheapest and lull u into a false sense of confidence. Since the merchants started sending price signals to store our own, what has happened to our quality and position as a supplier of good quality grain off season to the northern hemisphere? we have dropped back into the pack. Enjoy your stockholm syndrome deregulators
MicheleC
26/09/2014 5:54:53 AM

Australian wheat growers were in a "Sweet Spot" when we had the Single Desk! what an un-informative article this is. the only correct comment he made was have a punt! Our forefathers were sick of having punts so they bought in the single desk! Oh well back to the good old Crystal Ball :(
Queen St Farmer
26/09/2014 1:00:33 PM

Here we go again, still banging on about the single desk 6 years later. Wake up and enjoy the opportunities we never had before.
Australian Wheat Bribes
26/09/2014 1:15:34 PM

the desk is gone and it aint ever going to cost farmers again. the bids today dont carry provision for bribes
JT
26/09/2014 1:32:56 PM

Here we go again with misinformation. When a driver is found guilty of bad driving, we don't ban the motor vehicle do we. So suggesting banning the SD due to bad managers is no different. Anyway most of the few bosses accused have never been found guilty in a court, so it could only be traders banging on in fear of the return of SD. It is a lie to say that growers were prohibited from using the paper trade to hedge and price their wheat under SD too. They could play all the paper markets without limitation. What about the Land Survey. Over 60% still vote for SD today. Any Govt would love 60% +
GFA
26/09/2014 1:42:17 PM

Wheat bribes and Queenie, if you are so sure Single Desk is gone for ever how come over 60% in the current Land Survey still favor it.? And if you are so sure why is there such a scent of fear and panic in your posts? Or why do you bother posting your opposition at all?
Philip Downie
26/09/2014 2:27:27 PM

AWB it didn't cost the farmers anything in fact they sold at very good prices. Secondly if UN and Saddam had their way many more than the estimated 1/2 mill people would have died from starvation because one was ineffectual and the other didn't care. Plus no WMD anyway even Johnny is embarrassed. He should be about his selling out wheat growers as well to the US multinationals, just to get the deputies badge.
Australian Wheat Bribes
27/09/2014 6:32:45 AM

it cost the export states their basis premiums for many moons. now they collect their rightful basis they are insulated form market routs like the one that is happening now. fortunately for nsw there is drought in the north east so domestically plenty of options. desk is gone and solvency tests loom for those unable to adapt to the new environment phil youd probably be more employable if you embraced the 'free market' or more correctly least corrupted
john from tamworth
27/09/2014 7:36:26 AM

GFA, they would be the 60%(of a statistically irrelevant survey) that will not be farming in 20 years.In other words they would be the failures,the ones who couldn't or wouldn't adapt and we will all be better off without them.
Dalby
28/09/2014 11:32:37 AM

The panic amongst our anti single desk traders is reaching fever pitch with most thinking Aussie farmers still believing in its benefits. As JT correctly points out you don't stop using ships just because of an erring ships captain. But if you are a trader, you shudder at the thought of ever having to really compete again in the market like you did before 2007. All your power and dominance over the grower would disappear again eh.
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