Have Australian Grain Prices Hit Bottom?
YES In Our Opinion the only way is UP! “However….”
I Think its common knowledge that usually harvest prices can represent some “Value” additionally for speculators “Pre-Contracted” prices can work in favour of both Supplier or Buyer (usually trade buyers)
Hypothesis 1: Trade Buyers and End-users go shopping during April pre-planting – May of any given year hoping to snag a bargain from suppliers and or simply playing the paper market. For example some growers in Victoria sold pre-harvest 17/18 contracts for: Wheat $280, Barley $250 & Oats at $200 per metric tonne… do the maths!
Hypothesis 2: Trade buyers and End-users buy grain into storage or off-the-header at harvest. In Victoria delivered into various sites averaged from Wheat $378-$410 Barley #320-$370.. Do the maths!
Hypothesis 3: Trade buyers and End-users buy grain on contract on a delivery period plus carry, usually between January to June in any given year. Delivery can happen at anytime during Jan-Jun if purchased on a buyers call contract. So, [IF] prices post harvest are lower than harvest site prices then most Trade Buyers and or end-users would NOT be motivated to take delivery of any new contracts UNLESS offers are significantly lower than the harvest pre-contract site prices.
Hypothesis 4: Predictable market conditions and unpredictable market conditions.
Harvest not enough storage.
Farmers need cash-flow
Budgets; by March- April every year for planting seed, fertiliser, chemicals, wages, equipment
In my opinion, it comes down to farm / business management, in particular for Farmer/Growers. How well a grower manages; finance, expenditure, planning, marketing, rotation and equipment will determine whether or not they will be at the mercy of market conditions at any given point in time. We have found that the ability for some farmers to manage business affairs is highly determined by the amount of external advice they can research or pay for. The above commentary is free…