Workshops add grain marketing to grower tool kit
GroundCover™ Issue: 102 | Author: Melissa Branagh-McConachy
Workshops funded by the GRDC are helping growers to navigate today’s complex grain marketing environment
The free market that has evolved since the 2008 abolition of the single desk for export wheat has presented new marketing options – and significant challenges – for Australian growers.
With more than 25 accredited bulk wheat exporters servicing Australian markets, growers are faced with a broader range of pool options, cash contracts, financing and payment alternatives. Anecdotal evidence suggests many find the choices overwhelming.
The issue prompted the GRDC to initiate grain marketing workshops to lift growers’ understanding of the new grain marketing environment.
Coordinated by agribusiness consultants Rural Directions Pty Ltd, the technical workshops were conducted in Glenelg, South Australia, and Swan Hill, Victoria, engaging 64 growers from a diverse geographic area within the southern region.
Rural Directions consultant Pene Keynes says that before the workshops many participants described grain marketing as difficult, time consuming, frustrating and stressful. “Prior to deregulation, growers put grain into a regulated pool and only had to concentrate on harvesting a good product,” Ms Keynes says. “But pools aren’t just pools anymore. Growers now have to look at different marketing alternatives and there are various buyers and selling tools.
“The market is very fickle; prices are now driven by global influences that may not have anything to do with Australian grain. So growers must have a strategic plan for good grain marketing and it’s not about trying to sell at the highest price; it’s about choosing profit over price.”
Ms Keynes says the GRDC-funded workshops – the first of their kind – advocated a portfolio approach to grain marketing that focused on selling smaller grain lots over a longer period, “to average prices over the year and reduce the risks of going with just one buyer”.
“A lot of growers have been dissatisfied with their returns, but lack the confidence to market their grain independently,” she says. “Our brief was to equip growers with the skills and tools to follow best practice grain marketing.”
Delivered by various industry experts, the two-day course focused on: providing an understanding of the grain marketing environment, including major grain trading exchanges and how they affect prices in Australia; simplifying harvest administration and contract management; familiarising growers with grain marketing terminology and concepts; and helping growers to use grain marketing products and tools to maximise their potential business incomes.
A key objective was helping growers to develop a grain marketing plan that considered key farm management principles including policy development, cost of production, defining individual and business risk profiles, developing price guides and implementing position reporting for risk management.
A final evaluation of the Glenelg and Swan Hill workshops, written by Ms Keynes and Rural Directions colleague Natasha Morley, said participants reported a greater understanding of, and increased confidence in, grain marketing overall. A post-workshop survey indicated most were using the grain marketing tools and had either started to develop a grain marketing plan or already had one in place.
Beyond the workshop introduction, growers expressed a need for more specific training in derivatives, and practice time to consolidate the concepts being taught.
Ms Keynes says the two-day course provided a solid introduction, but there is also a need for more targeted training in areas such as derivatives. “A lot of growers are looking at options and swaps to hedge grain prices off the futures market but it can be very complex; ‘grain marketing derivatives’ is really a course in itself.”
Workshop participant Mel Kitschke, who farms a 1600-hectare property at Jamestown in SA’s Mid North with her husband Pete and parents-in-law, says the workshop gave her a much better feel for grain marketing.
Ms Kitschke says the workshop provided a clearer understanding of grain marketing terminology, which has enabled her to sift through the deluge of grain marketing information and advice.
“Understanding grain marketing is extremely important, as the overall price you get for your grain can be the difference between the business making a profit or a loss,” she says. “But there are so many different ways to sell grain and so many different buyers, which need to be kept in the context of what suits your own business and cashflow needs.”
Ms Kitschke says the most important message reinforced in the workshop was the need to sell small parcels of grain throughout the year to create an average price, rather than trying to pick the highs and avoid the lows. “The main thing that supports this is having good bookkeeping systems in place to manage multiple small contracts,” she says.
“Suggestions to do a grain market snapshot every morning – even though it’s hard to find time to do this each day – as well as working out cost of production and doing regular position statements (grain sales versus potential yield position) as the season progresses, were also valuable.”
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GRDC Project Code RDP00009