With Wheat harvest approaching, the Aussie Dollar plunging and world financial markets in meltdown, I was wondering how growers were coping with the marketing of their crops.
So I called one of our wheat grower Agmates Rowell Walton from Condamine Southern QLD and asked him if he’d share his thoughts with us.
Below Rowell gives us his thoughts and has kindly taken some great photos to show us what his crop looks like. Over to you Rowell [pictured below]
Well what are you doing about marketing your wheat?
Asked Steve Truman, a rare being, trying to tell the truth in the media, an idea which has become inconceivable to most.
I am afraid Steve, I am a little bit lost. The world has changed and the relative stability we once knew is gone. People are talking of 1929 and fear is haunting our financial markets. Free market capitalism is being abandoned at a much faster rate than it ever was able to entrench itself.
You would think that a grower who is well trained in selling his unregulated sorghum crop would have no trouble.
In Southern Queensland domestic regulation began to unwind in the early nineties, and export wheat lost its Guaranteed Minimum Price soon after.
It was under the Labor government and we all blamed Labor but in reality it had nothing to do with the colour of the Party, it was a long buried philosophy rising from the dead, be it incrementally. It was ugly and nasty but a new generation could not recognise it.
In that first year of the removal of the GMP our price slumped to an average $58.00 per tonne from pre harvest $175.00. A QRAA bloke sat at my table and told my family that it was unsustainable and that his advice was to sell up and leave. …well thanks mate we said.
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This year, 2008 the Wheat industries Single Desk was removed. It was a Labor government which removed it, much as I get pleasure from that observation, I have no time what ever for the Liberal or National Parties who had years of government to assure it could not be removed, instead they lay the platform of its removal, and had they won government it would have been removed by them.
So what have you done about marketing your grain? This year we have grown a large wheat crop, some sunflowers, and anticipate some sorghum.
The Sunflower crop was easy, I would not grow them unless I could have a price superior to other crops, that there was minimal risk of failure, so I have a hectare contract. This contract pays me to a reasonable production level a good price and if the season is poor no penalty for failure. So that’s easy, we do the best we can on the production side, that is our area of expertise.
The sorghum, as yet unplanted was priced in the cash market, ( no hectare contracts available) so actual tonnes are sold. Yes if we fail to produce we are in for a beating. But the price is good, much better than where we are today, I could wash it out and be in front. A great speculative move you may think, speculative nevertheless.
The big one is the wheat. Well Steve I sold what I thought was about 30% of my anticipated production at the very high prices (about $400 per tonne) but that is all to date.
Yes I tried to place some more on the last futures rally, but failed to get any done, on the day we tried, was a Friday and no body would do the business…the market topped out and I was left stranded. Yes we had a plan, and we did not anticipate the slump, which we are all feeling now.
Recently I have considered the place of pools in my marketing plan. Because of the timing of our harvest and the large domestic market, our cash market has always been very attractive. I have rarely used pools in recent times.
However I have a memory of pools and their behaviour in the old regulated days when the AWB was the farmers friend and operated the pools to get the best result for the pool participants, farmers. This memory is not relevant to this new world.
Pool operators, and there will be quiet a few of them, will make a competitive return for participants but any windfalls are more likely to become profit in other places for the business rather than extra return for pool participants.
That is, a pool will operate to make a competitive price but the operator will make as much as possible from the operation of the pool. Now this is an observation, and if anybody thinks its different then please let us know. The pool price ultimately will be a reasonable, average price for the life of the pool.
And there will be no transparency, try asking the AWB, Graincorp or ABB how many tonnes they have forward sold for the pool. No answers you say. Well if one of those companies had a percentage forward sold at say $400.00, what would compel them to allocate it to the pool? Nothing, and understand those are the rules.
As well there is talk in the grain community that a shortage of cash may become evident and a race to bottom in the cash market may result. This overlaid with the dreadful international instability and who could guess where we my be in six months time.
Likely some more cash and some pools will be the best marketing spread, but with the heat, I am uncertain of the quality so till we have it binned its very hard to effectively price it. And I know Steve that leaves me being a big speculator…once again.
Thanks Rowell for telling us what your are thinking. Rowell sent a ton of photos and here to finish off is a few more.
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Have Your Say – or ask Rowell a question.
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Tags: ABB, AWB, Cash Wheat Price, Condamine QLD, Graincorp, Rowell Walton, Wheat, Wheat Marketing, Wheat Pools
