Selling grain quickly lowers the pricing

Many analysts have reported that grain prices bid to Australian growers are well below values being traded in international physical markets.

Just this past weekend India reportedly purchased APW1 wheat from Australia at US$426 per tonne cost and freight (delivered their ports), which equates to approximately A$567/t FIS WA and A$543/t track eastern Australia.

Why is the disconnect in prices happening?

There has been commentary about supply chain access, funding constraints and wet weather impacting quality, as contributing factors towards the difference in prices bid to growers versus the international market.

In my view, the simple reality that growers have been selling at prices bid to them, is the largest reason creating a lower grower bid then global values.

Many growers wanting to sell grain quickly have been hammering prices lower.

It is the buyers right to act commercially.

This means if their advertised bids keep getting filled with grain sales, the bids are not likely to improve.

Growers can't expect buyers to pay more than they need to buy grain.

When a buyer takes ownership of grain, they take on the risk associated with funding the purchase of grain, finding a home for it, insuring it, executing delivery of it, and hopefully getting paid for it.

These supply chain costs are higher than normal currently and Australia can only ship a certain amount of grain each month.

Hence if growers want to sell more than buyer demand, Australian values get discounted.

However, growers should also be aware that there is a lot of grain to be shipped out of Australia this marketing year which has not yet been bought by exporters.

Similarly domestic users, container traders, and other opportunistic traders are unlikely to have accumulated their requirements.

There are plenty of buyers who want to buy Australian grain.

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Growers have the ability to offer their grain for sale at the price they feel is fair value on an anonymous, secure and independent exchange so all buyers can see the grain and try to buy it.

There is no potential bias or influence in the market to give one buyer an advantage over the other.

This promotes a more efficient market and ensures the buyer with the highest demand, or highest willingness to pay, can crunch their numbers and try to purchase your grain.

Don't limit your grain sales and price discovery to buyers that you know.

There are more buyers willing to buy your grain.

If growers are able to slow down their selling pace and offer grain for sale at stronger prices, they would very likely be receiving better values.

On behalf of the team at Clear Grain Exchange, we would like to wish all growers and participants in the supply chain a safe and Merry Christmas and a Happy New Year.

Every year throws up challenges and this year has been no different for all involved in the Australian grain industry.

Hopefully it has also created opportunity.