31 Aug, 2012 03:30 AM
FOR YEARS, Australian wheat growers had
a uniform marketing product in the
national pool.
In recent years, some on the east coast
could have a nibble around the margins
and push some wheat onto the domestic
market, but by and large, the national
pool was the only game in town.
It’s been a rapidly evolving environment
in the years post deregulation, and we
have been left with a betwixt and
between pooling system, where pool
operators are forced to put a pricing
estimate out there, without much
confidence of the final result.
The recent WEA report into pool price
reporting uncovered a worrying trend in
that the clear majority of estimates
were higher than the final payout.
It’s a competitive market out there and
the farmers’ primary priority is price,
so it would be a hard sell to convince
pool managers to post conservative
estimated returns when they are locked
in a tough struggle with dozens of other
grain buyers in a bid to win grain, but
this erring on the high side does the
overall pooling system no favours.
As it stands, I feel pool operators have
to offer something special in a bid to
attract grain, so further
underperforming pools are likely to lead
to an even greater swing towards growers
selling for cash.
Pooling is a system ideally suited to
grain marketers, where they are able to
accumulate large parcels of grain to
market, while leaving all the risk in
the hands of the grower, so they need to
be able to offer a specific benefit, and
there are various specialty pools
emerging doing just that.
That’s been the good side of competition
– a suite of new pool products tailored
for the various needs of growers.
Whether this is the ability to average
out sales to help manage volatility, tax
advantages from spreading payments out
or premiums for specific grain types or
early commitment, pool operators have
thought outside the square – but it all
amounts to naught if end values
consistently come in under what has been
quoted.
A solution? It’s difficult, because if
anyone could pick the market, they’d be
sunning themselves in the Bahamas rather
than slaving away behind a desk.
Perhaps a voluntary code where pool
operators have to publish the
differential between the EPR averaged
out over the year and the final pool
dividend for the last five pools on any
promotional material for their current
pools to give growers a snippet of how
they’ve performed in recent years.
Free marketers may cry out that it’s a
case of caveat emptor and that farmers
need to do their research before
committing, but if grain marketers don’t
want to have to wear the burden of
purchasing the entire crop upfront, then
there needs to be some overhaul of price
discovery in the pool system.
FOR YEARS, Australian wheat growers had
a uniform marketing product in the
national pool.
In recent years, some on the east coast
could have a nibble around the margins
and push some wheat onto the domestic
market, but by and large, the national
pool was the only game in town.
It’s been a rapidly evolving environment
in the years post deregulation, and we
have been left with a betwixt and
between pooling system, where pool
operators are forced to put a pricing
estimate out there, without much
confidence of the final result.
The recent WEA report into pool price
reporting uncovered a worrying trend in
that the clear majority of estimates
were higher than the final payout.
It’s a competitive market out there and
the farmers’ primary priority is price,
so it would be a hard sell to convince
pool managers to post conservative
estimated returns when they are locked
in a tough struggle with dozens of other
grain buyers in a bid to win grain, but
this erring on the high side does the
overall pooling system no favours.
As it stands, I feel pool operators have
to offer something special in a bid to
attract grain, so further
underperforming pools are likely to lead
to an even greater swing towards growers
selling for cash.
Pooling is a system ideally suited to
grain marketers, where they are able to
accumulate large parcels of grain to
market, while leaving all the risk in
the hands of the grower, so they need to
be able to offer a specific benefit, and
there are various specialty pools
emerging doing just that.
That’s been the good side of competition
– a suite of new pool products tailored
for the various needs of growers.
Whether this is the ability to average
out sales to help manage volatility, tax
advantages from spreading payments out
or premiums for specific grain types or
early commitment, pool operators have
thought outside the square – but it all
amounts to naught if end values
consistently come in under what has been
quoted.
A solution? It’s difficult, because if
anyone could pick the market, they’d be
sunning themselves in the Bahamas rather
than slaving away behind a desk.
Perhaps a voluntary code where pool
operators have to publish the
differential between the EPR averaged
out over the year and the final pool
dividend for the last five pools on any
promotional material for their current
pools to give growers a snippet of how
they’ve performed in recent years.
Free marketers may cry out that it’s a
case of caveat emptor and that farmers
need to do their research before
committing, but if grain marketers don’t
want to have to wear the burden of
purchasing the entire crop upfront, then
there needs to be some overhaul of price
discovery in the pool system.
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