Selling In A Low Priced Environment

Posted in March 2017 - in ,

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!!!!

 

 

What our customers have to say
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 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.
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.
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.
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