The return to wheat pools may force an early close
With the Australian wheat harvest forecast to be over 32mln tonnes this year by ABARE and prices sitting at six year lows in Australia, many growers have been left wondering what to do with their wheat crop.
Typical choices are to sell for cash (at six year lows), hold and hope (& pay warehousing or risk quality issues on farm) or utilise one of the many pool products available in the market today.
AWB Pool Manager Charlie Brown said “we have seen a huge increase in demand for the harvest pool this year, and it’s not only due to our regular customers growing bigger crops, but also we have seen a large number of growers return to us after many years of selling cash, with nearly 50% of today’s deliveries coming from growers not in our pools last year.”
“Given the harvest is nearly a month behind last year, we are hoping to keep the pool open for deliveries to the end of this month (vs 20th Jan last year), however as a pool manager our primary focus is always to protect participants who have committed tonnes, so with the increased demand, combined with relatively flat markets at the moment, it means we are needing to seriously assess closing the pool early as each days commitments roll in as the risk we face is lots of tonnes committed late and prices falling at the same time.’ said Mr Brown.
“What has been interesting this year is how evenly spread commitments are across the country with very good volumes seen in Qld, NSW & Victoria, large increases on the last few years, while the SA & WA growers continue to support the AWB harvest pool,” he said.
Chicago futures in Australian dollars today traded at AU$212 per tonnes, which is around a six month high, perhaps indicating that the wheat market may again have some life in it. Unfortunately however the premium for Australian physical wheat has decreased over the past month likely due to a massive Australian crop adding to the world surplus.
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