The Benefit of Deferring Your Grain Sales Program This Season – 08/01/2018

Chris Coore, Agfarm Advantage Manager

As we enter the new year, it is a good time to explore grain prices and if they will provide success for those who choose to defer their sales program this year.

First, a little wrap of the current conditions.

Canola prices have seen a significant fall in values across the country due to a weaker oilseed complex around the world and a lack of export sales due to barley controlling the shipping stem. A lot of buyers have purchased their short term fill and are pulling back their bids, however with dry weather entering South America there is a chance an offshore rally in soybeans could lift Australian canola prices higher.

Domestic wheat prices have also been declining over the past three months. The Northern Hemisphere continues to produce record breaking crops which are competing aggressively into Australia’s key export homes in Asia. Australia has been forced to compete against Russian wheat values to secure export demand, which has resulted in exporters bidding the market lower.

Selling wheat at current values means you are selling the lows of the wheat market in most port zones since September 2017 (see figure 1).

National APW1 Price Comparison_OL

The good news? There are strong hopes for wheat values to rally.

Wheat values have a lot of promise to rise for a number of reasons. First, once the strong front end barley program finishes, exporters will turn to wheat again, as at current values we are now competitive enough to export to Asia. This will likely occur in March 2018 when logistic issues usually occur in Northern Hemisphere ports due to freezing weather. This freezing weather has already started in America and has caused a stronger start to the Chicago wheat markets this year as the potential of winter kill is rising, especially for the higher protein wheat areas (see figure 2). The second reason is speculative funds have carried a near record short position across all agricultural commodities, including wheat, and some are concerned they will need to start buying back their short position creating weight behind the bid. The result should be the same we have seen in barley recently; exporters should start bidding up the market to ensure they secure wheat for their shipping program.

Chicago Wheat Futures_OL

What happened with barley?

Over the past three months China and the Middle East have been buying barley and other feed grains aggressively. This has created a large shipping program for barley from December to March 2018, resulting in exporters buying the short barley program back. Despite growers selling a large volume of barley and the Australian dollar firming over 200 points, the 40% decrease of production and added hunger from export destinations wanting to own Australian barley has led barley values to be well supported, and in some port zones around Australia, the same price as ASW1 wheat.

What options are there to defer your sales program?

Agfarm Advantage allows you to separate your cashflow needs from your grain marketing. It is an indexed selling program which sells equal portions of your grain over the time period you choose taking the lows out of your grain marketing. You can choose advance, monthly or deferred payment options and it accepts all grades of wheat, canola and barley. Agfarm Advantage allows you to benefit financially from any rally in prices post-harvest. The 2, 5 and 10 month harvest programs are closing on the 19th of January, so if you wish to benefit from deferring your sales program this season, call your local Agfarm Account Manager on 1300 243 276 or visit agfarm.com.au/advantage.

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