How Voluntary Grain Pools Works in
Australia
In early August, three of FarmLink’s
professional women grain marketers
joined on a study tour of seven women
farmers and grain traders from
Australia. The trip was hosted by a cash
grain brokerage company called Agfarm
Australia, which helps farmers sell
their crops for higher prices. Over the
course of their visits and tours,
FarmLink gained some very interesting
insights into how voluntary pooling is
working in Australia. All of the aspects
of these contracts are workable in
western Canada.
The Australian Wheat Board (AWB) lost
its monopoly five years ago, and was
since bought by Cargill. Them, along
with Viterra, GrainCorp, Glencore and a
few other buyers of Australian grain,
all offer voluntary grain pooling
contracts to their producer customers.
Agfarm’s voluntary pooling contract has
some advantages over the others, related
to the fact they work solely with
producers, and because the company is
focused on getting the best possible
prices for the farmers who put their
grain in the Agfarm pool.
Here’s how it works. Producers can
choose from a 5 or 10-month pool, and
the pools are run for canola, wheat,
barley and sorghum. Grain has to be
committed to the pool within about 2
months of harvest. Farmers can deliver
to almost any elevator of their choice,
as Agfarm has agreements with facilities
covering 95% of the capacity across the
Australian grain belt (about 300
individual delivery points).
Agfarm Australia’s policy is to sell an
equal portion of the crop every month.
Their focus is on offering out their
tonnage to all their buyers, and
extracting the maximum value possible.
They don’t hold an opinion about short-
term price direction or try to time
sales into futures market rallies,
instead they work industry
relationships, logistics expertise,
their knowledge of the local trade and
their feel for where and when the best
value comes available. Premiums are
achievable by accessing markets
otherwise unattainable by individual
growers and accessing scale benefits.
Agfarm Australia also offers a 3-month
pool, which they call their ‘harvest
pool,’ because it provides the most cash
up front, including an ‘initial payment’
made within 3 days of delivery (Note:
standard grower payment terms are 30
days end of week of delivery). Figuring
out which of the voluntary pool option
to use hinges on the producer’s
individual needs and risk tolerance:
basically, the longer the pool period,
the longer the marketing window giving
greater exposure to the market both
positive and negative; whereas the
shorter the pool period, the sooner they
get paid.
The payment terms under Agfarm
Australia’s voluntary pooling contract
are particularly attractive. On the 15th
of each month, they issue a payment
based on the previous month’s price. So
if you marketed 1000 tonnes of wheat
into the pool, and the average selling
price was $255/t in the first month, two
weeks later you would receive a payment
for $25,500 (1000*10%*$255 = $25.50/t or
$25500). Each month afterwards you’d
receive similar payments regularly;
almost like receiving a salary for grain
production.
Each month, they send a financial
statement to all growers who delivered
into the pool reporting sales to date
and the performance of the program. The
program is finalized prior to the next
harvest, enabling growers to evaluate
how the voluntary pool performed in the
past year before making any decisions
for next year’s marketing.
www.farmlinksolutions.ca
Australia
In early August, three of FarmLink’s
professional women grain marketers
joined on a study tour of seven women
farmers and grain traders from
Australia. The trip was hosted by a cash
grain brokerage company called Agfarm
Australia, which helps farmers sell
their crops for higher prices. Over the
course of their visits and tours,
FarmLink gained some very interesting
insights into how voluntary pooling is
working in Australia. All of the aspects
of these contracts are workable in
western Canada.
The Australian Wheat Board (AWB) lost
its monopoly five years ago, and was
since bought by Cargill. Them, along
with Viterra, GrainCorp, Glencore and a
few other buyers of Australian grain,
all offer voluntary grain pooling
contracts to their producer customers.
Agfarm’s voluntary pooling contract has
some advantages over the others, related
to the fact they work solely with
producers, and because the company is
focused on getting the best possible
prices for the farmers who put their
grain in the Agfarm pool.
Here’s how it works. Producers can
choose from a 5 or 10-month pool, and
the pools are run for canola, wheat,
barley and sorghum. Grain has to be
committed to the pool within about 2
months of harvest. Farmers can deliver
to almost any elevator of their choice,
as Agfarm has agreements with facilities
covering 95% of the capacity across the
Australian grain belt (about 300
individual delivery points).
Agfarm Australia’s policy is to sell an
equal portion of the crop every month.
Their focus is on offering out their
tonnage to all their buyers, and
extracting the maximum value possible.
They don’t hold an opinion about short-
term price direction or try to time
sales into futures market rallies,
instead they work industry
relationships, logistics expertise,
their knowledge of the local trade and
their feel for where and when the best
value comes available. Premiums are
achievable by accessing markets
otherwise unattainable by individual
growers and accessing scale benefits.
Agfarm Australia also offers a 3-month
pool, which they call their ‘harvest
pool,’ because it provides the most cash
up front, including an ‘initial payment’
made within 3 days of delivery (Note:
standard grower payment terms are 30
days end of week of delivery). Figuring
out which of the voluntary pool option
to use hinges on the producer’s
individual needs and risk tolerance:
basically, the longer the pool period,
the longer the marketing window giving
greater exposure to the market both
positive and negative; whereas the
shorter the pool period, the sooner they
get paid.
The payment terms under Agfarm
Australia’s voluntary pooling contract
are particularly attractive. On the 15th
of each month, they issue a payment
based on the previous month’s price. So
if you marketed 1000 tonnes of wheat
into the pool, and the average selling
price was $255/t in the first month, two
weeks later you would receive a payment
for $25,500 (1000*10%*$255 = $25.50/t or
$25500). Each month afterwards you’d
receive similar payments regularly;
almost like receiving a salary for grain
production.
Each month, they send a financial
statement to all growers who delivered
into the pool reporting sales to date
and the performance of the program. The
program is finalized prior to the next
harvest, enabling growers to evaluate
how the voluntary pool performed in the
past year before making any decisions
for next year’s marketing.
www.farmlinksolutions.ca
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