Adrian Mondy | Grain Marketing Advisor | 0428 722 524
The CBH pricing saga has been much discussed in recent times and whilst I’ll attempt to discuss other pricing issues in this article, I can’t avoid including the topic because it has, and still is, affecting decision making when selling grain is concerned.
Imagine if you can, that fixing a breakdown is a bit like selling your grain this year – it’s the middle of harvest, it’s stinking hot (well maybe not this year) and the aircon in your header has broken down. You think it’s the compressor so you:
- Don’t want to shell out $780 so you spend a few hours trying to find a work around (i.e., selling to CBH) but end up frustrated as all you’ve done is wasted valuable time and accomplished nothing.
- You then decide to call the dealership to see if they have one in stock (i.e., take the next best price) – unfortunately they had one but they sold it a couple of hours previously while you were trying to fix yours.
- So, the only choice you have left is to order a new one and hope that it arrives before you finish harvest (i.e., wait for prices to recover). In the meantime, you have no choice but to sweat it out in the cab.
Whether you agree with CBH’s pricing regime or not, it’s hard to deny that what it has done to many is blinkered their overall view of the market and to some, this may prove to be costly. In the beginning, CBH’s pricing for the main 3 commodities was far and away the best on offer but, as has been discussed ad nauseum, they were largely inaccessible. Despite this we were all seduced by what was being offered and most continued, and continue, to down tools at lunchtime and have a crack at selling to CBH with little to no success.
You would all be familiar with the sayings “You can’t see the forest for the trees” or, depending on where you are from “you can’t see the dog for the fleas”? I believe these are applicable to the behaviour of many growers, and advisors, in recent times as we’ve been blinded by the unobtainable prices and in doing so, rejected the lower bids on offer at the time. A prime example of this is Non-GM canola in the Kwinana zone – whilst everyone was chasing the highs of $980 offered by CBH, there was a bid of $900 staring us in the face. For 10 days.
Now that we’ve reached the stage where even CBH pricing has succumbed to the pressure of a large crop, and reality has kicked in that 100t here or there won’t cut it in terms of selling for cashflow, growers who are undersold have a difficult decision to make because those ‘safety net’ prices are long gone. To make matter worse, those in the south who haven’t had a good run at harvest yet, now have real concerns about quality particularly if this wet weather continues.
This makes it very difficult to commit to any fixed grade contracts which are presently providing the best value.
So, the choices on offer now are sell now before prices slide further, hold over harvest and hope for improved pricing opportunities next year, use the CBH deferred pool for any unsold grain or a combination of all three. Before making any decision, it is important to take a step back, park your frustration about the lack of access to CBH prices, reassess your cashflow needs and perhaps revisit your budget pricing targets.
Harvest pressure and sliding prices can quickly lead to panic selling and that is the last thing we want happening en masse. It is also worthwhile remembering that this weakness in prices we are experiencing now is quite normal in large production years; it doesn’t make it any easier to manage but for those that are lucky enough to have crops that are surpassing yield expectations, those ‘bonus’ tonnes should provide some level of comfort when there is a need to sell into a falling market.
The conundrum that some growers find themselves in this year (although it must be said that this is one out of the box in terms of selling grain!) does highlight the importance of having a grain marketing plan; a strategy that covers at least 12 months and preferably two years. Having some structured guidelines in the background will always provide some sort of direction when marketing your grain in uncertain times. If this is something you think you could benefit from, our Planfarm Marketing Advisors would be more than happy to help.