East coast drought driving up grain prices across the country
Story sponsored by AWB.
Tough conditions on the East Coast and the subsequent shortages have driven up grain prices exponentially, which is good news for growers on the West Coast who – despite recent frosts – are still on target for a massive harvest.
However, experts are warning growers not to count their chickens before they’ve hatched. High prices don’t necessarily translate to maximised profits. You still need both a solid sales and management strategy in place. Otherwise you’re really just tossing caution to the wind.
AWB’s Territory Sales Manager for the Geraldton area David Cripps says it is essential that growers consult with their accountants and devise a strategy that will be most advantageous for their individual circumstances.
“Every grower is different. Every farm is different so every grower needs to have a strategy in place which suits their operation,” he explained.
“To not have a strategy in marketing grain would be like not having a strategy in an AFL game. You can go out and do your best but at the end of the day, everything needs to be working together to deliver the best results.”
AWB has a number of selling options for growers. The secret formula to success, Mr Cripps says, is to find the mix that is right for you.
One of the most attractive options this year will surely be the cash price. So at any given time you can sell into the market for the price on offer. Given the shortages in the east, there’s a fairly good chance these prices will be high.
If you want to spread your price risk you can be part of a selling pool, which might not achieve the highest individual prices on the day but it will provide consistency and a strong long term average across the season.
However, there is also a third option. An inherent issue with any commodities market is instability and fluctuations. That’s why AWB have devised a new product called “Market Ultra”.
In many ways, Market Ultra gives growers the best of both worlds: it allows them to get a minimum lock in price for their grain at delivery but still take advantage of increases in the futures market through an averaging mechanism.
“Production Advance is another product which we offer for growers that need cash flow,” Mr Cripps explained.
“Most growers are looking for a bit of extra cash flow by the time harvest comes around so this can help out if you need to fill up the fuel bowsers and pay those first few weeks of wages before the money starts flowing in from the grain deliveries… So if they’re with AWB we can give up to a $100 advance on the tonnage of those contacts for wheat and $200 a tonne for canola.”
At the end of the day however Mr Cripps pointed out there was no such thing as a one size fits all strategy, you’ve just got to find what works for you. The only thing that is essential, he says, is crop insurance.
“Crop insurance is very important,” he said.
“We’ve just had a number of cases over the weekend where we’ve had fire and hail events in the Geraldton area. So it’s very important to have your crops insured.”
For more information on any of these market strategies click here.
Story sponsored by AWB.
