We have been talking for the last two years about the increase in world production of all grains. Wheat has been increasing from a world supply point of view for the last three years. Most countries have had reasonable to good harvests and this has pushed the stockpiles up.
Consumption has been under production and this simply means we have an increase in ending stocks. This scenario is good for avoiding shortages of grain and allows many people in third world countries to be feed. Unfortunately, from a selling point of view this causes prices to diminish as no one is going to pay high prices for something of which there is plenty of.
Each year we look for the country that will fall over from production issues which will thereby increase demand for these commodities. This year is no different but most countries are again shaping up for a reasonable crop. There may be some changes in the second half of the year but from where we sit now, production is looking reasonable.
WA is shaping up, so far, for an average too extremely good crop potential. The main areas of concern to date have been too dry in the north eastern zones of the Geraldton zone and some small areas along the south eastern coast which have had too much rain.
Pricing so far this year has been lacking any excitement. Many prices have been travelling in quite low percentile ranges except Canola which is looking quite good. Will this change? Well you could say that production is a key factor in price determination and when you look at the world situation there is no shortage as we have stated. Maybe domestic basis will support prices locally? Right now you would estimate that WA production will be well supported and therefore local basis will likely not be tested or pushed too high levels.
To achieve an average price this year you will have to be on your grain marketing game. Opportunities may be short, sharp and could also be hard to spot. One tip we can pass on is that local buyers (WA) will still need to buy grain and are doing so already. To a local buyer this is taking risk off the table for them and securing known grain which assists in organising shipping and international sales in advance. So far this year opportunities have come when price holds low for a while then the market improves slightly. The buyers then aim to be the first buyer to meet the magical numbers (round numbers like $280/t etc). They have pushed to meet these levels and you will notice that basis increases for that day. There have been limited opportunities so far.
As a grower you know how hard it is to sell all your grain at good numbers so keep in mind this year that pricing opportunities will need to be more frequent if you end up with higher yields. Alternatively you need to increase the tonnage commitments per pricing point to cover the possible extra tonnes. This is a hard thing to do as we all get stuck in selling patterns but remember that your selling strategy needs to reflect the current year not copy what you have always done.B
Be prepared to act when opportunities may come after June and onwards. Don’t get caught pricing only in the start of the year, be prepared for the second half of the year.
Finally remember that the cost of a grain marketing consultant can be offset in one transaction. Most of our growers do not have time to access the markets each day, monitor prices, check basis levels, and finally negotiate the absolute best price achievable on the day.
As the Phantom says “Sometimes you need the strength of Ten Tigers to achieve this”