Pooling... where is it going?
Copyright 2013 Australian Broadcasting Corporation
All Rights Reserved
April 12, 2013 Friday 9:50 AM AEST
Days of grain pool numbered
The editor of the grain market newsletter Profarmer
says the days of the traditional grain pool are
numbered.
Malcolm Batholomaeus says these pools are no longer
appropriate in the current deregulated market, the
pools consistently underperform and leave growers far
too exposed to price falls after harvest.
This follows grain marketing company Emerald's
revelation that when its 2011/12 grain pool closes this
month it will fall well short of expectations.
The final value of the pool would have fallen by $30
per tonne, which equates to millions of dollars in
decreased equity.
"In a regulated market operated by AWB pooling was
quite a good option for growers to maximise returns
on their grain, in fact when I used to look at the data
on this it was only in drought years that selling for
cash during harvest would outperform delivering to
the AWB pool."
"So they've had a very strong track record, it was a
hedged pool, they used to provide protection for price
falls after harvest as well as capture some of the price
gains during that period. That's all changed since the
market was deregulated."
"We just haven't seen any of the pools since
deregulation perform in the same way as AWB used to
perform."
"In part that's because we have far more operators so
we have a large number of very small pools with small
operators who may get it right or wrong. In a large
pool a few crook trades can be averaged out across a
large tonnage, in small pools it's not quite as flexible."
"I think farmers who are still using pools haven't
understood that the performance of pools has changed
radically since the AWB days. I think when the market
deregulated they said look we are not interested in
marketing our grain we're not interested in putting the
time or money into it we will buy a marketing product
off the shelf for five or six dollars a tonne and place it
in a pool. Unfortunately they haven't understood that
the performance of pools has dropped dramatically
and it's nowhere near what AWB used to achieve."
"Traditional pools are no longer appropriate in the
current market structure we have, the operators of
traditional pools have tried to make them attractive to
growers by bells and whistles like increments or pre
commitment premiums and all this sort of stuff,
doesn't make any difference they have still
underperformed."
"When a grower delivers to a pool they are actually
handing over the risk management to someone who
has no idea of the risk profile in your own farm
business."
He said the days of the traditional grain pool are
numbered.
"To be quite honest I really think they have to be
numbered it's just not appropriate for an individual
farm business to allow someone who has no
knowledge of their business to manage the risk profile
in the grain market for them."
Josh Martin is the trading manager of Cargill Australia,
one of the country's largest grain exporters.
AWB is the farmer facing wholly owned subsidary of
Cargill Australia.
Josh Martin said pools are valuable marketing
alternative for farmers as a part of a portfolio approach
to marketing their grain.
"What I would suggest to farmers and to growers
across any region of Australia is to look at a traditional
pool for what it is."
"A traditional pool provides a longer dated exposure
and you know Malcolm was referring to short dated
pools, whether it's a traditional pool and we can define
a traditional pool as let's say an 18 month timeframe
or a non traditional pool which let's define as a shorter
timeframe at six to eight months for example that will
depend and heavily depend on the market dynamics of
each year."
"So to sit here and throw a blanket across traditional
pools and say they have no value going forward I think
is a complete gross exaggeration."
Copyright 2013 Australian Broadcasting Corporation
All Rights Reserved
April 12, 2013 Friday 9:50 AM AEST
Days of grain pool numbered
The editor of the grain market newsletter Profarmer
says the days of the traditional grain pool are
numbered.
Malcolm Batholomaeus says these pools are no longer
appropriate in the current deregulated market, the
pools consistently underperform and leave growers far
too exposed to price falls after harvest.
This follows grain marketing company Emerald's
revelation that when its 2011/12 grain pool closes this
month it will fall well short of expectations.
The final value of the pool would have fallen by $30
per tonne, which equates to millions of dollars in
decreased equity.
"In a regulated market operated by AWB pooling was
quite a good option for growers to maximise returns
on their grain, in fact when I used to look at the data
on this it was only in drought years that selling for
cash during harvest would outperform delivering to
the AWB pool."
"So they've had a very strong track record, it was a
hedged pool, they used to provide protection for price
falls after harvest as well as capture some of the price
gains during that period. That's all changed since the
market was deregulated."
"We just haven't seen any of the pools since
deregulation perform in the same way as AWB used to
perform."
"In part that's because we have far more operators so
we have a large number of very small pools with small
operators who may get it right or wrong. In a large
pool a few crook trades can be averaged out across a
large tonnage, in small pools it's not quite as flexible."
"I think farmers who are still using pools haven't
understood that the performance of pools has changed
radically since the AWB days. I think when the market
deregulated they said look we are not interested in
marketing our grain we're not interested in putting the
time or money into it we will buy a marketing product
off the shelf for five or six dollars a tonne and place it
in a pool. Unfortunately they haven't understood that
the performance of pools has dropped dramatically
and it's nowhere near what AWB used to achieve."
"Traditional pools are no longer appropriate in the
current market structure we have, the operators of
traditional pools have tried to make them attractive to
growers by bells and whistles like increments or pre
commitment premiums and all this sort of stuff,
doesn't make any difference they have still
underperformed."
"When a grower delivers to a pool they are actually
handing over the risk management to someone who
has no idea of the risk profile in your own farm
business."
He said the days of the traditional grain pool are
numbered.
"To be quite honest I really think they have to be
numbered it's just not appropriate for an individual
farm business to allow someone who has no
knowledge of their business to manage the risk profile
in the grain market for them."
Josh Martin is the trading manager of Cargill Australia,
one of the country's largest grain exporters.
AWB is the farmer facing wholly owned subsidary of
Cargill Australia.
Josh Martin said pools are valuable marketing
alternative for farmers as a part of a portfolio approach
to marketing their grain.
"What I would suggest to farmers and to growers
across any region of Australia is to look at a traditional
pool for what it is."
"A traditional pool provides a longer dated exposure
and you know Malcolm was referring to short dated
pools, whether it's a traditional pool and we can define
a traditional pool as let's say an 18 month timeframe
or a non traditional pool which let's define as a shorter
timeframe at six to eight months for example that will
depend and heavily depend on the market dynamics of
each year."
"So to sit here and throw a blanket across traditional
pools and say they have no value going forward I think
is a complete gross exaggeration."
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