When to Sell: Market Patterns Emerge30-Jun-2014

THE Australian grains sector is maturing following deregulation of the wheat industry, according to industry analyst Malcolm Bartholomaeus, and a pattern is beginning to emerge in terms of marketing opportunities.

Speaking at a Grains Research and Development Corporation (GRDC) farm business update in Horsham, Victoria, this month, Mr Bartholomaeus said during the first couple of years of an open market, it was hard to predict what would happen in terms of grain selling patterns.

Now, however, he says a clearer picture is emerging and farmers can take advantage of optimal selling times for their grain.
Interestingly, Mr Bartholomaeus said it is not a one-size-fits-all approach, saying different commodities have different times where pricing tends to be at its peak.

The ‘sweet spot’ for selling wheat

In terms of Australia’s most widely grown crop – wheat – Mr Bartholomaeus said the best time to sell was early in the New Year.
“The sweet spot for wheat is from January to April in most years, as a whole.

“Within that, some years you get really strong prices at harvest for some of the higher protein grains, as exporters and domestic users compete for limited supplies, however, overall the best time to sell is before Easter, as there is still some northern hemisphere production risk.
Mr Bartholomaeus said massive spikes were possible later in the year, but this relied on a serious production issue, such as during the 2010 drought in Russia, and the 2012 North American drought.

“You could have a punt on such an event occurring, but if it doesn’t happen you’re likely to see prices come down, so I don’t think it’s a particularly sound marketing strategy, given there are significant storage and interest costs in doing so, meaning your price needs to be a lot better than what it was earlier in the year.”

He said the lower grade wheats tended to be discounted off the header, but added these discounts normally narrowed in the new year.
“This makes them a very low risk commodity to hold, whether in warehousing or in on-farm storage.”

 
Storage opportunities

Mr Bartholomaeus said farmers were becoming more confident in using on-farm storage as a means of exploring blending opportunities.
“I see blending as the key opportunity you get from having on-farm storage, but of course it needs to be done carefully.”

In terms of feed barley, Mr Bartholomaeus said the best selling times were immediately leading into harvest and post harvest. “We tend to see a quite sharp dip in feed values at harvest time, it’s rare to see the best price for the year off the header.”

He said prices then tended to rally, usually moving above harvest values at least at some stage, especially in Victoria.

This means he sees feed barley as another storage opportunity for those with access to domestic markets.

“Holding feed barley on farm for domestic end users can deliver good returns.”

For this year, however, he said feed barley prices were still strong compared to last year which meant forward contracting now could be an option now for those comfortable with their production risk.

“It’s unlikely we’ll see harvest prices rise above what we see now.”

Different grain dynamics

“With malt, you often see the best prices prior to harvest or even off the header, the malt-to-feed spread usually closes right up once harvest is finished,” Mr Bartholomaeus said.

For canola, he said, the same counter-seasonal premiums that make wheat prices generally attractive in the first half of the year applied, only at a different time.

“The key time for canola is June to August, when the northern hemisphere soybean crop is not assured.

“The area is planted, but the crop isn’t secure, the market then drops away once these yields are locked in as the crop develops.”

Farmonline

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