Roger and Jenny Dietrich: 'put options' protect the final price of the crop.

Roger and Jenny Dietrich: 'put options' protect the final price of the crop.

Roger and Jenny Dietrich of 'Rockleigh', Old Junee in southern NSW were 1996 winners of the Golden Grower national wheat cropping competition in the Australian Premium White category. Their winning crop of Janz was planted mid-May on a 94-hectare paddock following canola. /p>

Soil testing, monitoring, weed control and adequate fertiliser in a direct-drill system paid off with an outstanding 5.35 t/ha harvest and grain protein at 11.5 per cent.

The crop was sold partially as a 100-tonne multigrade contract, a 70-tonne contract to a local poultry farmer, and the remainder to the AWB pool.

Ground Cover asked the Dietrichs about their marketing strategy. "In the year that we won the award we used 'put options' to try to protect the final price of our crop. Put options give you the right but not the obligation to sell an underlying futures contract," said Mr Dietrich.

"Futures contracts are different - if we were using them we would be selling contracts and we would be risking margin calls if the market moved in an adverse direction. With options you pay a premium (fee) and this is the only risk. If the market moves higher you lose your option premium. This is one way in which you can set yourself a guaranteed minimum price - we call this market insurance.

"This year I have been using full futures contracts but I think options are a better way to go.

"I started by going to a seminar and then went to a futures broker," said Mr Dietrich, who also employs a market analyst. "But you don' t really learn how it works until you start trading."

(In our next issue, Ground Cover will femure Mr Dietrich's monitoring system and rotations as well as his winning agronomic package for Janz.)