February and March are booked solid with consultants, accountants & bank managers all reviewing your budgets
(old and new season), crop rotations and July income management, plus plenty of crop updates and industry forums. Add a heap of summer rainfall and your mind is most likely on spraying.
Are you like many growers; too busy to focus on a plan for your remaining old season grain let alone think about the new season?
An ongoing seasonal grain marketing approach should see you winding up 2016/17, fine tuning 2017/18 hectares and refining 2017/18 and 2018/19 grain marketing strategies. Grain marketing never stops, just like the seasons.
If we assume an average season across the globe (unlikely), then wheat prices certainly look to remain at lower levels given world ending stocks at a 16 year high. The record production this season in WA and the eastern states is adding negativity to significant local carryover stockpiles.
Australian grain prices have been pain free over the past five or six seasons and pricing grain at current market levels isn’t what we are used to or want! Wheat prices hit rock bottom this year and right now returning to a 30th percentile pricing level ($270/t) seems a long way away.
In the current ‘Trump’ world, there’s sure to be an event to spark the market. Be prepared to price protect some grain at your budget levels. Protecting budget will be essential this season with budget being an acceptable outcome if it’s the worst price achieved and a superb outcome if it’s the best price achieved.
The February 2017 WASDE reported 748.24MMT wheat production and a 34% ending stocks to use ratio. This is maintaining last year’s % level due to a production increase of 13MMT. Fortunately, an increase in consumption has also occurred. Ending stocks are the highest we’ve seen since the 2001/02 season and will continue to put pressure on new season pricing.
It will need a significant change in market fundamentals for old season pricing to increase dramatically.
Current old season basis levels (+$35 KWI) are high in a world awash with grain. Unfortunately, (or fortunately) current pricing levels are fair to good in our current market environment. Could they go lower – absolutely! Could they go higher – possibly! Absolutely seems more realistic than a possibility. Buyers have been chasing certain grades in zones for blending. Take advantage of these small spikes as again liquidity is quite variable.
Old season Canola pricing has had a brief spike in Kwinana and Albany due to a trade short. There has been very little tonnage available to buy at these elevated levels. There is very little liquidity in Canola (numbers of buyers) as they aim to secure their requirements early in the year rather than wait. New season Canola pricing levels continue to sit around 50th percentile levels. They are well supported by the soybean market, particularly Argentina’s crop concerns due to excess rain. Locally, WA hectares will increase year on year and internationally, Canada have announced an increase of 1.1 Mln Ha.
When compared to current wheat percentiles of approximately 15% it makes a lot of sense to look very hard at ensuring some price certainty with canola. We have strong opinions and tell all individual clients what we think they should do now! It varies between regions and clients but you need to assess the risk/reward, take away the emotion and make an informed decision. Ten Tigers can help you with making a decision right for your business
Basis levels for new season are important to watch for pricing opportunities and for products like swaps derivatives.
Barley has had a fairly negative pricing year with a lot more malt hitting the window in the Kwinana zone than anyone predicted in a frost year. This made pricing quite difficult across the state as Kwinana zone leads the market for all buyers of Malt.
Much low protein wheat and masses of corn around the world has reduced feed prices and dragged Feed Barley down. Values appear to have flattened out at the moment but demand from buyers is quite flat in WA.
We often hear of growers holding grain because their tax situation dictates income needs to be deferred to July. This is not a particularly good reason to simply hold grain or set targets at unrealistic levels that were last achieved over six months ago. A solid understanding of your numbers needs to be in place and then a plan can be made around this information. Waiting for two months to speak to your “numbers guru” is simply putting off any hard decisions while many opportunities may slip past.
In many areas of the State it was a high input season, however many budget versus actuals were more often than not met with yield and perhaps met overall by another commodity ie; Canola’s above average market prices and yields this year.
It is essential to determine your dollars per tonne average sales to date across all commodities using your exact deliveries on contracts not on original base levels ie: APW1 or CAN1 that those contracts were taken out at. Then assess what meeting the market for a portion of your remaining tonnage (if not all) will do to your final averages. This allows you to set firm targets with the final result known if those levels are achieved.
Another fun thing to do (yes we are joking a little) is to accurately reconcile your payments from traders into your bank. Ten Tigers has flagged many mistakes this year from a multitude of buyers that are simply not picked up if you just compare RCTI’s with your bank statement. If you just do this then obviously they will be the same.
Our systems are extremely accurate as we know being pedantic with numbers is essential. Are you 100% confident in all your payments…….Really!!!!