Single desk demise drives purchasing change

29 Jun, 2012 07:39 AM
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7
 

AS wheat farmers are becoming independent grain traders following the demise of the single desk, the machinery industry is seeing the effects of these changes reflected in purchasing patterns.

Tractor and Machinery Association (TMA) of Australia executive director Richard Lewis said the end of the single desk has led to big changes in the way wheat farmers sell their product.

"As they become proficient grain traders and marketers in their own right, their investment in on-farm storage over recent years has put them in the driver’s seat when it comes to deciding when to sell," he said.

"This year, reports say, there is a real reluctance to sell while prices remain low. A large percentage of the harvest is still being held on-farm or in grain handler storage."

Mr Lewis said this changing scene is having a big influence on the purchase patterns of big ticket items, especially combine harvesters - and the emerging new order is posing something of a challenge for both manufacturers and dealers.

"There used to be a rhythm to the year. The first payment for each pool was a large lump of the forecast price and it was made them pretty well straight after harvest," he said.

"There was a dump of cash into farmers’ pockets early in the year.

"That's when they thought about ordering a new header for the following harvest. The machinery industry knew the ordering season would be on and had their programs in place.

"This encouraged forward ordering and helped with production planning.

"Nowadays cash flow is more evenly spread. The row of silos out the back is almost like an on-farm ATM - they just sell off a few loads whenever they need some cash," he said.

"Apart from changing cash flow patterns, there’s also less certainty about the final value of a harvest and that's also leading to a delay in big purchase decisions.

"It's becoming a balancing act for dealers and importers. How much stock do you hold in the expectation of orders later in the year?

"This gear has a long lead time. If you don't have some inventory on hand, it's very likely that you’ll miss out on sales - and farmers will miss out on new equipment for harvest.

"But bringing in a lot of units without forward orders also has its dangers," he said.

"Holding costs soon mount up if predicted sales don't occur."

Alan Kirsten of Agriview, who has been analysing TMA sales figures for many years, said the buying patterns are definitely becoming more spread out.

"The wheat marketing changes have had an effect. It's still shaking out and the next couple of years will give us a clearer picture. However, I think the industry will have to adjust to more second-half ordering activity.

"The trend is showing up with combine harvesters but I expect to see deferred ordering also for other big ticket items, including tillage gear. The second half could be good for these categories.

"We never used to think of tillage gear as a big ticket item, but a wide planter and large capacity air seeder can now run to half a million dollars.

"It's with these expensive purchases that farmers are adopting a wait-and-see attitude," Mr Kirsten said.

Another outcome of the death of the single desk had been a change in the way machinery is financed Mr Lewis said.

"A header was usually financed on annual after harvest payments but that's no longer the norm.

"Repayments now tend to be more frequent to match cash flows from grain."

Mr Kirsten said tractor sales had continued to hold up well in May following a very positive start to the year. The high horsepower category was still the standout with especially strong sales in Western Australia.

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Tractor and Machinery AssociationSource: http://www.tma.asn.au/
Date: Newest first | Oldest first

READER COMMENTS

Bushie Bill
29/06/2012 8:40:46 AM

Where are you Jock?
Corporate communist
29/06/2012 11:40:52 AM

At last we are seeing the serfdom reduced to the poverty that they deserve buying anything with nothing is difficult when we have all their cash Long live the revolution and our great new paradigm
Jock Munro
29/06/2012 7:01:12 PM

Thanks Bushie Bill-not in the least bit surprised that the extra risk and uncertainty that has been placed on growers has now being felt by the machinery industry. Wait until we have silos full of wheat that the merchants cannot sell because there is no receivor of last resort made worse by the fact that our reputation for quality and service has been shot to ribbons. The only winners out of this are the big multinationals like Cargil and Glencore. They must have trouble keeping the smiles off their corporate faces. The Labor Government and the Liberals should hang their heads in shame.
mark2
30/06/2012 8:12:29 AM

there's a certain amount of predictability about your input on this forum BB. I'm off to play with my big row of quite inexpensive ATMs , just me and the weevils!
Love the country
1/07/2012 5:39:30 PM

The single desk,that's what our fore farmers fortfore, we dumb farmers ,let the powers that be take away the single desk. Just stand back and look what's happened. Another layer of marketers in the middle man position, taking at least $10t for what, selling your grain.a no sweat job, done in seconds on a computer....easy cash..nothing is better for farmers,we without doubt are the losers big time. I can assure you our forefathers where not as dumb as us.period.
Ted O'Brien
2/07/2012 5:53:26 AM

Which wases a lot of ink telling us that without the single desk there is no certainty at all in the wheat industry. Lots of "maybe"s, no answers.
zero till
6/07/2012 5:43:01 PM

Big deal buying patterns are different! Judging by the amount of new tractors, headers, self propelled sprayers and no till seeders being bought by farmers in the key grain growing areas things are not that bad. There must be confidence if people are buying. The ironic thing is the few remaining single desk doom merchants probably havnt bought any new machinery in 30 years, there bread and butter being in sheep not crops!

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