I always have reservations writing Landline articles on Grain Markets, given how quickly things can change and how half reasonable advice can look quite poor once it has been distributed to an audience. However, I will do so today (22nd May) and will see how things pan out over the coming weeks. First things first, the below is not personal advice or a recommendation from myself or Planfarm Marketing, so please don’t treat it as such.

At the time of writing the season is late and confidence is low. The humble grain marketer is low down on the list of people to call, we get it. However, in times of despair often come opportunities for future seasons. 2025 season (next years) wheat swaps at the time of writing are hovering above $A400 levels. Over the last 6 years, this represents a very decent Decile 8 price. In other words, 20% of the time the price has been higher, while 80% it has been lower. That is despite for half of that 6-year period we have been experiencing the most volatile and high-priced period in grain prices on record. This was of course predominately due to the war between Russia and Ukraine, 2 of the biggest wheat exporters in the world. Other significant global events such as Covid, the war in Gaza, avoidance of the Suez Canal and more recently death of the Iranian President have been some of the big non-production related events that have affected grain markets in the last 3 years. Now despite a reasonable start to the Northern Hemisphere growing season, things have turned quickly, most notably by dry spells and frosts through key Russian and Ukrainian growing regions. But as we know things will change, (probably already has by time of reading) for the better or worse. Prices will return to ‘normal’ quicker than we realise, and we will be regretting such missed opportunities.

The advantage of hedging for 2025 is we get to start from scratch. We have no idea what things are looking like from a production side of things leading in, which is better scenario than what we can say for 2024. The chances of a large carryout from the 2024 season are low, so the likelihood of a glut of grain with not enough shipping capacity (2021 & 2022 seasons) is very low. This was the primary reason of why local pricing could not keep up with international prices and basis weakened to such low levels during these seasons. Given this season is looking so poor, if such rise was to increase in futures again we would expect basis to perform much better than it did then.

Now I can already hear the responses I am getting from this article. “Swaps!!, I never thought I would hear them being spoken again, let alone so soon”. Yes the 2022 swap experience was not enjoyable, most notably through the poor local pricing in comparison, more commonly known as (very) weak negative basis. However, the financial outcome for most was still very good, thanks largely to very big crops and the strong uptake of the CBH Pool across these seasons. The CBH Pool performance across these 2 seasons was incredible, with many growers still seeing the benefits though the yet to be finalised and distributed 2022 Deferred Sales Pools. In short, it allowed participants to receive high international level pricing across these seasons, despite local cash pricing at a significant discount. All be it the local cash prices were still at very good levels, hence why grower selling was so strong. The CBH Pool Mandate (Return all Pool equity less fixed Management Fee to participants) allowed growers exiting (buying) swaps at high international prices the ability to also sell grain at very high prices. As such, most experienced positive basis on swap exits, all be it from a less than conventional method.

Although this is unlikely to be the approach used for our swap management in 2025, given things are completely different on the production side, it is comforting knowing that if similar market conditions arise (high local production, high international prices & supply chain constraints) the CBH Pool will be a viable option once again for swap exits.

However, for those that it is a little too early to jump back into the Swap pool, that is completely fine as well. At the end of the day $420 APW1 is an incredible starting point to put under the bank manager’s nose.