A future for Grain Pools - 17 Apr, 2013
- GREGOR HEARD
IN SPITE of the bad press for pools in
recent times following a string of high
profile marketers delivering pools that
markedly underperformed their estimated
pool returns (EPRs), leading marketers
still believe there is a future for
pools, albeit with an evolution away
from the bulk pool products popular in
the past. Alex Campbell, pool manager at
Market Check, said much of the
conjecture focused on the inaccuracy of
EPRs.
“We think there will be an increased
focus on transparency, and with that in
mind, we have in the past offered pools
without EPRs because of the difficulty
in predicting the market that far out.
“There’s some merit in using the value
of the pool as it stands if growers need
a figure for budgets, as trying to
predict the future is too difficult, you
don’t see managed funds give predictions
“We, instead will look to publish as
much of the pool’s strategy as isn’t
commercially sensitive so growers know
what we are trying to achieve with a
specific pool.”
Cargill Australia head of commodity
trading and risk management Josh Martin
said he felt pools would continue to be
important, albeit with peaks and troughs
according to the dynamics of the year
marketing-wise.
“A year such as last year, you’ll see a
lot of grain sold around harvest time,
as prices are good, but fast forward a
year and if there is a lot of grain
about and prices are low, then maybe
pools will be a more attractive option
as at least part of a grower’s marketing
portfolio.” Mr Martin said it was
important growers knew what they wanted
from a pool.
“It is a tool for managing volatility,
so cutting out the lows of the market,
but with that, this means you don’t have
as much exposure to the upside.”
He said Cargill, and its grain
origination business AWB, were committed
to solving the problem with inaccurate
EPRs.
“We would like to see more transparency
and more benchmarking of results in
relation to EPRs.”
Head of distribution at Emerald Group,
Tom Howard, said poor performance in
some pool products would see growers
switch focus.
“We have seen some of our products not
perform so well, so maybe there will be
more innovative cash-based products to
take their place but we see pools
evolving.
“There will be more regional-based,
niche pools in operation, where growers
are not exposed to the export and
logistics risk of another area.”
Acknowledging the issues with overcooked
EPRs, such as with Emerald’s 2011-12
pool, Mr Howard said it was a problem
with pool products.
He denied pool operators were
artificially inflating EPRs to garner
business.
“It’s difficult enough to know what the
market will do tomorrow, let alone 18
months out, which is the life of some of
these pools, all pool providers when
they produce an EPR believe it is right,
but it is just that using an estimate is
a flawed mechanism.” Mr Campbell said
pools across the country were in
transition.
“Previously we’ve had pools that
operated in a similar manner to the
national pool, but without the certainty
of the tonnage the national pool had it
is impossible to offer the same
certainty.”
He said growers who had used pools
because of a lack of knowledge of the
grain market or did not have time to do
the research would increasingly switch
to the cash market.
But pool providers, with innovative
products that met the needs of growers
would still be able to attract tonnes,
providing they promoted themselves well
enough.
“There are pool structures there that
meet the needs of growers, even those
actively marketing their crop.
“Now, its important for pool providers
to help growers understand, there are
different providers. There are pools,
and then are pools.”
Mr Howard said different pools for
growers with different risk appetites
could also grow.
“We have had pools with high risk, high
reward, medium risk and low risk
options, and that could be something
growers will increasingly look out for.”
He said, overall, he felt cash would be
king. “There will be more and more cash
products, but in certain market
conditions, pool products will be
required.”
- GREGOR HEARD
IN SPITE of the bad press for pools in
recent times following a string of high
profile marketers delivering pools that
markedly underperformed their estimated
pool returns (EPRs), leading marketers
still believe there is a future for
pools, albeit with an evolution away
from the bulk pool products popular in
the past. Alex Campbell, pool manager at
Market Check, said much of the
conjecture focused on the inaccuracy of
EPRs.
“We think there will be an increased
focus on transparency, and with that in
mind, we have in the past offered pools
without EPRs because of the difficulty
in predicting the market that far out.
“There’s some merit in using the value
of the pool as it stands if growers need
a figure for budgets, as trying to
predict the future is too difficult, you
don’t see managed funds give predictions
“We, instead will look to publish as
much of the pool’s strategy as isn’t
commercially sensitive so growers know
what we are trying to achieve with a
specific pool.”
Cargill Australia head of commodity
trading and risk management Josh Martin
said he felt pools would continue to be
important, albeit with peaks and troughs
according to the dynamics of the year
marketing-wise.
“A year such as last year, you’ll see a
lot of grain sold around harvest time,
as prices are good, but fast forward a
year and if there is a lot of grain
about and prices are low, then maybe
pools will be a more attractive option
as at least part of a grower’s marketing
portfolio.” Mr Martin said it was
important growers knew what they wanted
from a pool.
“It is a tool for managing volatility,
so cutting out the lows of the market,
but with that, this means you don’t have
as much exposure to the upside.”
He said Cargill, and its grain
origination business AWB, were committed
to solving the problem with inaccurate
EPRs.
“We would like to see more transparency
and more benchmarking of results in
relation to EPRs.”
Head of distribution at Emerald Group,
Tom Howard, said poor performance in
some pool products would see growers
switch focus.
“We have seen some of our products not
perform so well, so maybe there will be
more innovative cash-based products to
take their place but we see pools
evolving.
“There will be more regional-based,
niche pools in operation, where growers
are not exposed to the export and
logistics risk of another area.”
Acknowledging the issues with overcooked
EPRs, such as with Emerald’s 2011-12
pool, Mr Howard said it was a problem
with pool products.
He denied pool operators were
artificially inflating EPRs to garner
business.
“It’s difficult enough to know what the
market will do tomorrow, let alone 18
months out, which is the life of some of
these pools, all pool providers when
they produce an EPR believe it is right,
but it is just that using an estimate is
a flawed mechanism.” Mr Campbell said
pools across the country were in
transition.
“Previously we’ve had pools that
operated in a similar manner to the
national pool, but without the certainty
of the tonnage the national pool had it
is impossible to offer the same
certainty.”
He said growers who had used pools
because of a lack of knowledge of the
grain market or did not have time to do
the research would increasingly switch
to the cash market.
But pool providers, with innovative
products that met the needs of growers
would still be able to attract tonnes,
providing they promoted themselves well
enough.
“There are pool structures there that
meet the needs of growers, even those
actively marketing their crop.
“Now, its important for pool providers
to help growers understand, there are
different providers. There are pools,
and then are pools.”
Mr Howard said different pools for
growers with different risk appetites
could also grow.
“We have had pools with high risk, high
reward, medium risk and low risk
options, and that could be something
growers will increasingly look out for.”
He said, overall, he felt cash would be
king. “There will be more and more cash
products, but in certain market
conditions, pool products will be
required.”
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