NAB tips for budgeting and grain marketing for 2013

Grain growers who have done their homework will usually get opportunities through the year to lock in price spikes above $300 per tonne and hopefully healthy margins. NAB’s Director of Commodities, Business Markets believes preparation is the key aspect of managing risk for grain growers

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Grain growers who have done their homework will usually get opportunities through the year to lock in price spikes above $300 per tonne (port) and hopefully healthy margins.

This was one of the key messages presented in Savernake, Buraja and Yarrawonga by NAB’s Tim Glass as part of a free annual roadshow organised by NAB Agribusiness and local accountants and agronomists.

The events are a chance for growers to have a pre-sowing budget discussion with an expert in grain marketing, to help them plan and manage their crop in the most profitable way.

Tim Glass is the Director of Commodities, Business Markets with NAB, and believes preparation is the key aspect of managing risk for grain growers.

“No one can tell what tomorrow’s price is going to be, but throughout the year there are usually opportunities for growers to hedge above $300 per tonne, and that’s a very good price when you consider long-term averages,” Mr Glass said.

“The first step is knowing your true cost of production per hectare, including finance. Then it’s important to establish a margin above this that represents a return on investment, accounting for drought risk.”

Glass says every grower will have different yields, cost variability and equity levels in land and machinery, which will all impact risk appetite and where an individual grower can comfortably manage their price risk in the forward market.

“I’ve been focusing on basis (the difference between the Australian price and the international price of wheat) and how to capture premiums when they occur.

“For instance, the current supply situation in Australia has created a strong basis for cash prices today and may well drive basis premiums for the following crop.

“We’re expecting an increase in the area sown to barley this winter due to seasonal conditions, reduced price volatility and surprisingly strong hectare returns versus wheat and canola,” Mr Glass said.

NAB recommends that growers seek professional advice when considering forward selling or other forms of hedging, to identify potential risks as well as rewards.

NAB Agribusiness managers can organise for customers to speak with Tim Glass and the rest of the bank’s specialist agribusiness risk management team, many of whom live and work in regionalAustralia.

 

Contact a NAB Agribusiness banker