Know Your Numbers

Posted in September 2016 - in

Wheat is charting new ground and there is nothing pleasant with current cash market levels. They are a reality and we need to create future reference points.  Currently, market wires, funds and buyers are reflecting a market with very little upside potential.  The market is the lowest we have seen and there is no comparison data or references.

Right now – analyse business cashflow requirements and revise budget levels relevant to your accurate yield.  There is no point reflecting on what you could have done.  Make decisions now and don’t be afraid to ask yourself “what if this is the lowest and I lock in?”  It may be, but it may not!

The EU recently reduced their ‘useable’ wheat estimated production by 11.2MMt last month to 133.3MMt, down 12% versus 2015/16 production (151.5MMt).  You can assume ‘useable’ indicates good yield but generally poor quality and consequently plenty of it.  We expect to see premium quality grades widen and conversely low grade spreads come under pressure.  Buyers will likely be keen to play a part in the quality market, more so if there continues to be a lack of local supply.  Focus on estimated grades and protect.  It may prove worthwhile dropping $1 or $2/t on base APW1 to secure an additional $4 or $5/t on ASW, H1, H2.  It is important to assess these numbers prior to contracting wheat.

As with wheat, the EU reduced their ‘useable’ barley production by 3.1MMt to 59MMt, down from 61.5MMt.  Again, we assume yields are good with ample feed barley supply to hit the market.  The EU is the number one producer and consumer of Barley and so it may be possible that locally, Malt premiums will be strong.   Ensure your Barley strategy is tailored to suit your accurate yields and this consequently may satisfy reduced budget levels.

China has stated its imports of DDGs (Distilled Dry Grains) will decrease as it continues to focus on oilseed imports. DDGs are any grains used to produce alcohol and obviously includes Malt Barley.  China will be the biggest swing factor this year in the barley market.  We expect that Malt values will remain at competitive spreads but underpinned by feed values.  With ample feed grain supply globally, it is hard to see Feed Barley maintaining current levels.  If China steps back into the market in a big way, we would likely see values increase but this is a big if. They have reduced barley imports to 6MMT from 10MMT.

 

If you need to know more about what to do in a low priced environment please give Ten Tigers a call.

 

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Ten Tigers has been my grain marketing advisor now for a period of 12 years. I have entrusted Chris Tonkin and his team to assist and direct me in the selling of my grains to suit my needs. With their experience, knowledge and regular contact and updates, I have been able to concentrate on the physical and practical side of farming without the added stress of watching the markets and possibly making wrong decisions. Allowing Ten Tigers to be my “personal broker” has put me in a position where I can relax, travel and profit from my every day farming life.
In the ten years we have been working with Chris and his team there has been a huge transformation in grain marketing in our business. Ten Tigers has made these steps a comfortable journey instead of the hill climb they appear to be when we receive correspondence from all different grain identities and our legal obligations we need to meet. Ten Tigers has assisted us to achieve higher daily prices regularly with good communication and sound advice. Ten Tigers has been an important member of our business allowing us to concentrate on growing our grain with the knowledge that Ten Tigers is there to worry about the marketing, optimisation and filling of contracts. The very detailed information that is supplied to us makes record keeping and entering g details into our accounting program very simple and quick.
Ten Tigers has helped our grain operation grow through a well-balanced marketing program of all our grain types in the current season and beyond. Ten Tigers has given me a greater understanding of our grain business through a fully transparent summary at the completion of each marketing season. Ten Tigers has given our business confidence to expand grain production by allocating achievable pricing target levels on all our grain types. Our business can better allocate time towards the production side knowing that Ten Tigers is managing our marketing in a professional, unemotional manner.
We decided to engage the services of Ten Tigers because we found we were becoming increasingly overwhelmed by the grain marketing decisions we had to make. We were sometimes making poor decisions because we had become indecisive and didn’t have clear target prices in place. We have found the staff at Ten Tigers an absolute pleasure to deal with. They are proactive in keeping lines of communication open and the paperwork they provide us with is easy to understand and very useful. The advice Ten Tigers has provided exactly what we needed. They have helped us set and reach targets and we have already seen the benefits of the grain marketing strategies they helped us put in place.
Ten Tigers is a business that specialises in grain marketing and consulting. We use Ten Tigers to help us achieve the best price for our grain, to find out what is happening in the world’s grain market to date and to help with marketing strategies. The best thing is, all this can be achieved by just a few text messages per day and / or a quick phone call while I stay busy growing as much grain as I can. I find them a great deal of benefit to our grain farming business.
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