Southern region growers urged to watch marketing risks
Author: Tristan Price | Date: 06 May 2013
The coming months will reveal whether Australian grain growers will face competition from higher supply from overseas as crops on the other side of the world approach harvest.
Profarmer grains marketing consultant Ron Storey says growers should be ready for increasingly competitive pricing this year as farmers abroad look to deliver larger crops.
“The outlook going forward is that 2013 prices do not look as rosy as 2012. There’s been a big response by farmers around the world to last year’s higher prices, so a lot more acres have gone in the ground,” Mr Storey said when addressing a Grains Research and Development Corporation (GRDC) Farm Business Update at Bendigo, Victoria.
“If weather is normal or average for the next two or three months, then we’re likely to see a very large northern hemisphere crop.
“If that happens, we would be more likely to see lower prices in the second half of 2013.”
Severe drought in the USA resulted in significantly low yields in the country’s corn crop last year, leading to high grain prices in the second half of 2012 and into 2013.
Crops overseas will need to return at least average yields for overseas markets to stabilise, which will become apparent as harvesting commences in parts of the northern hemisphere in May and June.
Although obtaining a good price for their crops will always be at the forefront of farmers’ minds, Mr Storey said it was important that farmers calculate a realistic pricing goal and stick to their marketing strategy.
“The first thing to know about grain marketing is to not try and ‘pick’ markets,” he said.
“The most important thing is that farmers plan ahead in the sense of not trying to read or predict the market, but to really be on top of their costs of production, and say ‘okay, I’ve got a target price that I’m shooting for’, not ‘I’m shooting for the top of the market’.
“If they work out in their head that they’ve got a target price that they’re trying to protect, then they can choose a range of options; cash, forward sales and swaps are different products that they can select to build around that target price that they’re looking for.”
Part of ensuring that crops make a good return is not just about managing risks on-farm, but ensuring that risks in marketing them are minimised. Mr Storey said there are various issues that growers will need to be mindful of when bringing their harvests to market, and a number of ways they can manage those risks.
“There’s a whole set of risks in the marketing package that growers are trying to manage apart from the price; there’s quality risk, counterparty risk (who they’re selling to), and factors like that. So they’ve got to manage those risks as well as price,” he said.
“As far as price is concerned, they can do it themselves by keeping well-informed, reading market reports, and keeping on top of which direction the market might be going, without trying to pick the top.
“Or they can outsource that and get a broker or a consultant who can provide them with that sort of assistance.”
Caption: Grains marketing consultant Ron Storey says growers should take steps to manage risk as forecasts show stability returning to grain prices overseas.
Ron Storey, grains marketing consultant, Profarmer
0418 332 431
Tristan Price, consultant, Porter Novelli
03 9289 9555
Region South, North