best practice management guide for south-eastern Australia - Grains ...

best practice management guide for south-eastern Australia - Grains ... best practice management guide for south-eastern Australia - Grains ...

04.01.2015 Views

Marketing Figure 16.1 Comparison of the canola price, delivered Newcastle NSW, at sowing (early May) and harvest (early December) and the seasonal high 1996–2008 Price $/t (ex Newcastle NSW) 900 800 700 600 500 400 300 200 100 0 410 398 408 313 320 460 need to look at pricing opportunities available well before sowing and during the growing period of the crop, taking into account the performance of their own crop, risks of forward selling and domestic and global marketing factors. It is necessary to know what is a high and low price so that you can set realistic target prices for selling. Growers will not normally sell more than 40–50 per cent before harvest on a conservative yield basis as disease, frosts, drought and a host of other factors can destroy crops and cause shortfalls in meeting contracted tonnage, which can incur large penalties. A good approach is to aim to sell certain percentages of the crop at specific times. So, for example, you could sell 10 per cent pre-sowing, 10 per cent on full ground cover, 10 per cent at flowering and another 10 per cent just prior to harvest. The timing of sales will depend on how the crop is performing as well as price. From well before sowing it is advisable to monitor the price of canola closely and on a daily basis when market prices are rising strongly. It is a good idea to have one or two sources of independent market advice: n this will ensure you are sent alerts or are aware when market action may be appropriate; and n you will receive regular newsletters with information on market trends. You should also organise to receive daily prices from the main traders and buyers via internet and fax. Inform whoever is likely to be selling your grain about your cropping intentions and ask for their field representative or agent to contact you if there are pricing opportunities. 575 423 415 96 97 98 99 00 01 02 03 04 05 06 07 08 Year May-sow Dec-harvest Seasonal high SOURCE: Profarmer 368 475 655 870 Options for selling grain Canola is a high-value crop and so should not be stored on-farm for long after harvest as the holding cost in terms of interest lost can soon mount up. Also, oilseeds stored for extended periods must be subjected to carefully controlled aeration to prevent the possibility of quality deterioration due to heating and to prevent stored product insect attack. Canola is usually sold off the header and stored at local delivery silos or trucked directly to the crushing plant. One useful option is to warehouse canola at the local silo as soon after harvest as possible. This eliminates concerns relating to any storage problems which may arise in the future, and can provide growers with more flexible marketing options after the harvest has been completed The number of ways of forward selling has increased considerably, a major reason being to reduce the risk to growers. A fixed price fixed tonnage contract – the traditional way of forward selling before harvest – entails some risk if used when crop outcome is uncertain. If the grower cannot deliver against the contract the buyer will usually ‘wash the contract out’ which may involve a penalty to the grower. The buyer will usually have the right to replace the failed contract tonnage by buying on the open market and the price needed to purchase the canola may be well above the market price bid to growers generally. The buyer may also give the grower the option to roll the contract over to the following year, but whether this is desirable largely depends on the difference between the contracted price and the market price when the contract is declared non-deliverable. Other variations of the fixed price, fixed tonnage contract include target price orders and no price established contracts where the pricing decision can be made at a date after contracting or delivery. A number of marketing pools are also available to growers. Over the Counter (OTC) products including basis contracts are now offered by most major traders, however, grower participation to date has been small. The products allow the grower to set the futures and exchange rate legs while leaving the basis leg unfixed. If the crop fails, as long as the basis is not fixed, the contract is non-deliverable. While the futures and currency hedges have to be closed out, any loss or profit is limited to these transactions and there is no washout penalty. A more recent development is the introduction of Bank Swaps. A grower hedges the futures and currency with the bank. It is a cash settled (nondeliverable) contract so the basis is established when the grower sells his canola. This contract gives the grower the choice of when and to whom to sell his canola. With any market strategy the grower must feel comfortable with the risks taken. Each grower must develop their own strategy, but it is important that marketing is given the same status as other technical decisions. The aim is to ensure the farming business does not suffer 88 Canola best practice management guide

Marketing because of a sudden collapse in prices late in the season and is able to take advantage of any spike in prices, so that the average price achieved is in the top one-third of prices for the season. All growers will have a different attitude to risk. Farmers who have expanded the farm enterprise to provide employment for children and have incurred significant debt as a result are more inclined to hedge prices to ensure debt repayments are able to be made. For a farm operator who is well established with close to 100 per cent equity it may be less important. Delivery standards are as follows: n Moisture content. Eight per cent maximum. If accepted over the maximum then a two per cent deduction in price applies for each one per cent moisture above eight per cent. Growers normally have little trouble achieving a moisture level of eight per cent; in fact many crops are as low as six per cent moisture when harvested. High moisture seed should not be stored as severe heating is likely. n Oil content. Forty-two per cent is the base level, with 1.5 per cent premium or deduction for each one per cent above or below 42 per cent. n Impurities. Seed is rejectable at over three per cent (by weight) impurity. If accepted, a one-for-one penalty operates up to four per cent, and two-for-one penalty operates above four per cent. Impurities include weed seeds, stem and seed pieces, and very small shrivelled canola seeds. Most growers achieve a fairly clean sample and few are penalised for impurities. n Test weight. A minimum test weight of 62 kg/hectolitre applies. Seed is rejectable under this limit. n Broken seed. Seed is rejectable if it contains over seven per cent broken seed. There is a 0.5 per cent price penalty for each one per cent broken seed above this level. Broken seed consists of hulls, kernels and seed pieces normally resulting from mechanical damage. n Damaged seed. Up to three per cent of seed may be damaged without penalty. A 0.5 per cent price penalty applies for each one per cent broken seed above this level. Seed is ‘damaged’ if it is affected by heat, frost, sprouting or other weather damage. n Field insects. Up to 10 large field insects per 0.5 L are allowed (grasshoppers, woodbugs, ladybirds and Rutherglen bug) and 100 small field insects (thrips/ aphids/mites) but loads may be rejected if they contain higher levels of these insects. n Green seed. Up to two per cent without penalty. Loads may be rejected above two per cent using the ruler method or determined as chlorophyll, up to a maximum of 12 parts per million, and rejectable above this level. A full copy of the Canola Standards can be obtained from the Grain Trade Australia (formerly NACMA) website (www.nacma.com.au). Canola best practice management guide 89

Marketing<br />

because of a sudden collapse in prices late in the season<br />

and is able to take advantage of any spike in prices, so that<br />

the average price achieved is in the top one-third of prices<br />

<strong>for</strong> the season. All growers will have a different attitude<br />

to risk. Farmers who have expanded the farm enterprise<br />

to provide employment <strong>for</strong> children and have incurred<br />

significant debt as a result are more inclined to hedge prices<br />

to ensure debt repayments are able to be made. For a farm<br />

operator who is well established with close to 100 per cent<br />

equity it may be less important.<br />

Delivery standards are as follows:<br />

n Moisture content. Eight per cent maximum. If accepted<br />

over the maximum then a two per cent deduction in price<br />

applies <strong>for</strong> each one per cent moisture above eight per<br />

cent. Growers normally have little trouble achieving a<br />

moisture level of eight per cent; in fact many crops are<br />

as low as six per cent moisture when harvested. High<br />

moisture seed should not be stored as severe heating<br />

is likely.<br />

n Oil content. Forty-two per cent is the base level, with<br />

1.5 per cent premium or deduction <strong>for</strong> each one per cent<br />

above or below 42 per cent.<br />

n Impurities. Seed is rejectable at over three per cent<br />

(by weight) impurity. If accepted, a one-<strong>for</strong>-one penalty<br />

operates up to four per cent, and two-<strong>for</strong>-one penalty<br />

operates above four per cent. Impurities include weed<br />

seeds, stem and seed pieces, and very small shrivelled<br />

canola seeds. Most growers achieve a fairly clean sample<br />

and few are penalised <strong>for</strong> impurities.<br />

n Test weight. A minimum test weight of 62 kg/hectolitre<br />

applies. Seed is rejectable under this limit.<br />

n Broken seed. Seed is rejectable if it contains over seven<br />

per cent broken seed. There is a 0.5 per cent price<br />

penalty <strong>for</strong> each one per cent broken seed above this<br />

level. Broken seed consists of hulls, kernels and seed<br />

pieces normally resulting from mechanical damage.<br />

n Damaged seed. Up to three per cent of seed may be<br />

damaged without penalty. A 0.5 per cent price penalty<br />

applies <strong>for</strong> each one per cent broken seed above this<br />

level. Seed is ‘damaged’ if it is affected by heat, frost,<br />

sprouting or other weather damage.<br />

n Field insects. Up to 10 large field insects per 0.5 L<br />

are allowed (grasshoppers, woodbugs, ladybirds and<br />

Rutherglen bug) and 100 small field insects (thrips/<br />

aphids/mites) but loads may be rejected if they contain<br />

higher levels of these insects.<br />

n Green seed. Up to two per cent without penalty. Loads<br />

may be rejected above two per cent using the ruler<br />

method or determined as chlorophyll, up to a maximum of<br />

12 parts per million, and rejectable above this level.<br />

A full copy of the Canola Standards can be obtained from<br />

the Grain Trade <strong>Australia</strong> (<strong>for</strong>merly NACMA) website<br />

(www.nacma.com.au).<br />

Canola <strong>best</strong> <strong>practice</strong> <strong>management</strong> <strong>guide</strong><br />

89

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