Challenges of unpredictability

Farming

is forever throwing up a new set of challenges, and as all farmers will tell you, no one season is ever the same.

After a dry and uncertain start this year we had some good rain, it got a little wetter, then it was ‘whoa nelly!’

Now growers are dealing with wet paddocks and edging their way through the last of fungicide sprays as well as deciding how to approach the hay season before harvest gets underway – all the while watching commodity prices creep lower and hoping that a late frost stays away.

Despite many areas suffering from waterlogged and lodged crops, all forecasting bodies are still tipping bumper yields, with current estimates of a national wheat crop of about 28-million tonnes, as high as 31-million tonnes, and a total harvest of between 46 and 48-million tonnes when including barley, canola and pulses. To put this into perspective, Australia’s average wheat production is about 24-million tonnes and the biggest ever was slightly below 30-million tonnes in 2011-12.

The biggest total winter crop was in the same season, coming in just shy of 46-million tonnes.

With yields set to be high and prices for cereals at very low levels historically, growers in western Victoria are investing in on-farm storage to help manage the logistical and marketing challenges that will be placed upon them in the coming months and year ahead.

As a result, silo manufacturers are busier than a stump full of ants and looking for a grain bag to buy has drawn comparison with looking for a polar bear in a snow storm.

Growers are expecting they will have to hold onto a portion of their crop in the hope that a spike in prices will come at some point into next year or beyond.

The reasons why there is a focus on on-farm storage rather than warehousing are many and varied. But they include avoiding the monthly storage costs of bulk handlers along with the turnaround time and availability of trucks while trying to keep up with the header during the peak of harvest.

All are valid reasons and storing grain on farm is often very profitable. It is worth casting an eye beyond harvest however, and considering what the dynamics of the market might look like after harvest is all wrapped up.

With large amounts of grain on farm, it is likely to put a lot of pressure on domestic markets with the stockfeed market only able to handle so much, and the container and delivered port markets, although forever expanding, are also only able to offer limited opportunities.

This is particularly the case in a year where there is likely to be an abundance of low-quality grain. It is also worth noting on-farm storage has become somewhat of an art in recent years.

Growers who specialise in this area, as well as investing big dollars in their storages, have spent a lot of time grooming relationships with prospective buyers either themselves, or through their marketers, with the aim of being on a buyer’s speed dial when the deal is ready to be done.

Although considered expensive at times, warehousing grain has its own advantages. Quality of grain delivered is maintained throughout.

Depending on the site there are arguably more marketing options and market consistency, and payment terms of most major buyers are short with some as quick as seven days end of week.

Most bulk handlers will also have a period of generally two to three months before monthly storage fees kick in, giving growers a chance to gather their thoughts and potentially offload grain before monthly charges take effect.

Other incentives to deliver grain into the system are sure to come out of the woodwork as pre-harvest site meetings take place in the coming weeks.

Whichever way you look at it, there is likely to be a lot of grain around post-harvest and without a working crystal ball it is impossible to know what is going to happen in the future.

It is also unfortunate that we rely on the hardship of others around the world for our grain farmers to receive high prices for their products.

However, in the event that prices do get on the move quickly sometime in 2017 due to misfortune elsewhere, and without advocating one storage method over another, it might be worth having as many irons in as many fires as possible to take advantage of all opportunities that come up throughout next year. This means not shunning the bulk-handling system completely.