The best decision you can make is actually making a decision. You probably think we have lost the plot, but let’s consider this closer.
When you are faced with making a decision all you can do is weigh up the factors you have on hand at that moment and then make the decision. This is exactly the same as the umpire who makes the call on a play. Just as the umpire, we do not have the ability to call on hawk eye or refer to the third umpire or challenge the call for a slow motion replay. In our game we refer to this as hindsight marketing. They are plenty of those players out there that make no decision but then spend their time shooting down the ones that do make a decision.
The falling market is one of the hardest markets to sell your grain into and that is what we have faced this year. It’s the whole “how do you catch a falling knife scenario”! You can either take the pain and grab it on the way down or let it bottom and pick it up off the floor. Which is better?
Chart 1: Best daily Kwinana cash price (August – June)
This chart shows the APW multigrade cash prices from 2011 to 2016. We have started it from August because hindsight does not help at this stage in the season. The red line is 2016. We are trading at miserable levels but it is important to recognise reality. It is highly unlikely that we will follow the green line of 2011, so a hard decision needs to be made about where we travel from here till harvest and beyond.
Is selling wheat profitable at current levels? Do your numbers accurately and you may be surprised.
We are all afraid of selling grain into the falling market because we are scared that we will sell and then it will turn, leaving our sale at the bottom. Or is it just pride that we think our grain is worth more than this? Both scenarios are probably true to some extent but do you know what….the world doesn’t really care. Wheat is wheat at the end of the day. If you do happen to sell at the bottom of the market it doesn’t really matter. Yes your grain is probably worth more than current prices BUT, will that make the price go up, No.
The market will eventually turn and trade back up but will it do so before you need to sell. Holding grain till next year is a strategy if you have a plan attached to that. Just holding grain is not a strategy by itself. The ostrich sticking its head in the sand or effectively just closing your eyes is not a proven way to achieve a good outcome. It costs more to hold grain than many people believe. This has certainly been shown this year with the many people who have held grain without a plan. We have been sold out of old season grain for a long time. That was a good decision. These decisions can only be made when you have good information, good advice, good execution and know your numbers. Take the stress out of life and out-source the work to people who know what they are doing.
Chart 2: Best Feed Barley Kwinana cash price (August–Mar)
This chart show shows the Feed barley cash price from 2011 to 2016. The red line is 2016. As you can see this is in no better shape than wheat. Hoping for a repeat of 2014 is not likely. The Chinese have not entered the market in anywhere near the fashion of a year ago.
Don’t get caught with prices of yesteryear in your head thinking that they are normal. Face reality and realise that this year will not get to the numbers that have been there before. Hopefully yield will be increasing and therefore total “gross” dollars at the end of day are increased.
Many will watch the falling market go all the way to the bottom. Many will then lament that they didn’t sell earlier or sell more. A few will be tough enough to make the big decision to sell into the falling market and probably end up with a better average than most once all tonnage is sold.
Don’t be a hindsight marketer and tell everyone what you would have done. If you can’t make the tough decisions then employ someone who can. Look at the big picture which includes yields, total deliveries and total income for the year. In many areas of the state it is looking like being a good yield outcome for 2016.