Nic Sewell | Grain Marketing Advisor | 0436 606 525
The last month of grain marketing has been a very interesting time, mostly due to the unusual pricing tactics implemented by CBH Marketing & Trading (M&T). M&T have made a significant change in their approach to buying grain, whereby their online pricing is withdrawn within seconds of going live. Advisors and (many) growers across the state have been eagerly awaiting the release of pricing during the day just to get a single 200t contract away. However, it has got to a point where not even those poised and ready on the live pricing release times are securing a single contract. Trust me, I know, I am 0 contracts from 4 attempts today across all 4 port zones and thought I was quick at this sort of thing given I managed to buy footy grand final tickets last year in Perth!! So, the big questions are why is CBH doing this and how should I approach this?
Why are CBH doing this?
M&T are largely doing this to drag competitor pricing higher. In effect they are saying to the market that their prices are a more accurate reflection of where pricing should be, largely based off international prices and profit margins. Although growers are discovering that securing sales at these prices is extremely difficult, and highly unlikely to access, we are all hanging onto the thought that sales might be possible. CBH pricing is roughly $25/t stronger than the next best bid, so if you are lucky enough to secure a 200t contract, it’s equivalent of a win of $5,000 in chips on the roulette table. For that reason, all of us are reluctant to sell grain below CBH levels in the hope we will get lucky and cash in our chips. Or better yet, that other buyers will meet CBH pricing to attract tonnes from growers. Despite the widespread frustration, the approach from CBH
is working. Sales pace has slowed significantly despite the WA crop getting bigger. Although buyers have not been able to match CBH levels, we are seeing much stronger pricing than we would normally have otherwise, with some buyers prepared to narrow the price gap between CBH and the rest of the market which is a small win.
Why are M&T pulling bids so quickly?
Put simply, M&T does not have the capacity to buy the amount of grain that growers want to sell. From a free-market economics point of view, this is market failure whereby supply exceeds demand yet price is not dropping. M&T have a limited export capacity, largely because they were unsuccessful in picking up additional shipping capacity in the auction process a couple of months back. Therefore, they had to rely on only their Long Term Agreement (LTA’s) shipping access from earlier in the year, which is about 60% of the total export capacity. Also, given the amount of pool tonnes that CBH M&T must export from both 2021/22 season Harvest Pool and their 2022/23 Flexi-starter Pool commitments their appetite was always going to be limited. Hence the reason why they are only willing to buy very small amounts of tonnes each day, together with their limited appetite for 2022/23 Harvest Pool tonnage.
How do we approach this?
There is no single approach for handling this unique situation. Our only advice is don’t let this frustrate you, ruin your day and distract you from what is most important. For some, this means trying your luck on the roulette table and logging into to CBH Loadnet at your allocated open times (see below). We recommend setting a reminder in your calendar each day 10 minutes prior to the pricing release. If you can get to a computer or tablet (and reception) within 5 minutes it’s worth a shot. If not, that’s ok as well. We don’t recommend planning your day around a computer at midday as you will more often than not feel disappointed that you’ve wasted your time.
So, what do we do?
• Login to CBH LoadNet at least 5 minutes prior to your port zone opening time and be mentally prepared when pricing becomes live. Have a minimum price in mind as you won’t have time for consideration once pricing is live.
• Geraldton is 12:00pm, Kwinana 12:15pm, Albany 12:30pm and Esperance 12:45pm.
• Select the CBH LoadNet menu path > “Contracts” > “Pricing and Contracting” and narrow your target down to a specific commodity and contract. Some bids are fixed grade contracts and unless you have quality
confidence, avoid fixed grade pricing at this stage.
• When the price turns blue, click the number immediately. In the next screen, enter the tonnes (max 200t) and click “Continue”. This needs to be done extremely quickly. If you get to the next page, you are successful, so click to confirm the contract and notify your advisor.
If like most of us, you are unsuccessful, go back to your day. All WA growers and advisors are in the same boat and so any tonnes sold via this process should be seen as bonus. If you are undersold, we strongly encourage you to look to the next best market pricing available. These prices are lifting and beginning to look more attractive when reviewed in isolation. If not prepared to sell at these prices, then we recommend
having a backup plan, which a Planfarm Marketing Advisor can help with.
We wish you all a safe and prosperous 2022/23 harvest