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Thursday, April 06, 2017

New post-harvest delivery service: a no-grainer?

By Olivia Agar  |  Source: Ag Concepts, Trade

Key points

  • GrainCorp are offering a new FarmDirect post-harvest delivery service
  • Receival is for 2016/17 season grain with a tolerance to insects, under controlled quality parameters and fumigation
  • Opportunity for growers to hold grain for exposure to later markets
  • Accumulators are offering loan options and grain marketing with the service

Grain1

GrainCorp are opening up their service offering by allowing post-harvest delivery from on-farm storages to the GrainCorp system. This means growers can access more market options without the added worry and risk of managing on-farm storage themselves.

With the record crop and improving export demand in the current market, many growers are looking to hold their grain in storage with hope to access better prices by being exposed further out from harvest. GrainCorps FarmDirect has been unveiled with timely perfection, offering a service primed for the current market and grower demand. Growers will be able to deliver their grain with a quality guarantee, grain management and marketing flexibility all included in the GrainCorp service.

FarmDirect is an attractive option for growers concerned about storing and managing the quality of their grain on farm. A receival tolerance of up to 10 stored grain insects (dead or alive) per half litre is accepted in addition to all other Grain Trade standards. GrainCorp have initially rolled out the program for 13 different sites across Southern New South Wales and Victoria which are available for the 2016-17 season grain. It’s also currently restricted to milling quality wheat and feed barley for this season but with hopes to expand the locations and range if the initial pilot program is well supported.

Post-harvest delivery to GrainCorp will provide access to online cash marketplaces, such as CropConnect or Clear Grain Exchange, for the ability to sell through domestic and export opportunities at any time. Growers also have the option of combining the service with a pool managed marketing program. Agfarm have been quick to jump on board with their Fast Cash product, offering loan options and marketing solutions for post-harvest grain. By delivering on farm grain to a GrainCorp site and transferring to one of Agfarms online products, growers can access additional services including upfront cash drawdowns and ‘set and forget’ price targets for sale in the open market. This provides an extra level of flexibility, finance management and risk management which was previously not available for on farm stored grain. 

There is of course the question of whether the additional costs involved in the service are likely to pay-off when it comes time to sell or if growers would have been better off taking a price at harvest. In Figure 1 we have looked at the change from average harvest prices to July physical prices over the last 30 years based on ASX Melbourne. To fairly compare we have used a carry cost of $2 per month for 5 months. The worst result was a 57% decrease in price from harvest to July in 1994 and the best being a 39% increase in 1990. The severe volatility in price change is clear but we can also see a marginal favour over the long term towards better prices at harvest compared to July. 

What does this mean?

In the current market where we have a surplus of stock and growing demand from exports, GrainCorps FarmDirect initiative is a good opportunity for growers wanting to hold their stock but also have access to more selling opportunities in the export market. The service will take away worry for growers concerned about on farm storage management and provide logistical benefits. However, in future years if we see a change in balance of domestic supply and demand it will be unlikely that the service will be quite as attractive. 

Mecardo information is provided to assist in your marketing decisions. It contains a range of data and views on the current market. It is not intended to constitute advice for a specific purpose. Before taking any action in relation to information contained within this report, you should seek advice from a qualified professional. The information is obtained from a variety of sources and neither Mecardo nor Ag Concepts Advisory will be held liable for any loss or damage whatsoever that may arise from the use of information or for any error or mis-statement contained in this report. 

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