Every season is unique. What can we learn from this one?
Peter Sarcevic, AWB
The changeable commodity markets have left some growers questioning their marketing decisions over the last six to twelve months. The old saying rings true, ‘Don’t regret anything you’ve done in the past because it was exactly what you wanted at the time. Now make the choice for the future.’
I have been asked quite a lot recently about what can be learnt to inform future marketing strategies. For me, I think it is a good time to revisit some of the key principles of managing price risk that are apt for any market conditions.
- Accept that you cannot consistently pick the market with pin point accuracy. Markets are dynamic and susceptible to change and with this comes the need to manage price risk.
- Take a step back and objectively set a realistic target price for your crop. The target price should be one that makes sense for your business and is realistic. Once you set this price it is easier to execute at these levels without second guessing yourself. Forward contracts can give you certainty of your target price and some have built-in upside, like Market Ultra that guarantees a minimum and provides a premium if the market moves favourably after harvest or a pool which offers a floor price feature.
- Stay active in the market and participate for longer. Markets are changeable and by taking a longer term view you can execute in increments at favourable price levels over a period of time. You are effectively building your overall price over a period of time, averaging the better market conditions.
- Get your marketing mix right. A well rounded marketing strategy will make good use of a number of price risk management tools, like forward contracts, futures, managed marketing/pools and cash. These tools will help you spread your risk and not put all your eggs in the one basket.
- Choose a product that is right for you. There are plenty of marketing products that manage different levels of risk. Pre-harvest pools have expert marketers working to beat the average market over a full year – acting when it makes sense, and staying out of the market when it doesn’t add up. There are also marketing products like Basis Plus that help you access the futures market so you can take advantage of positive price movements months or years in advance.
- Good businesses are clear about roles, responsibilities and accountabilities. If you are going to manage your own price risk, make a commitment to do it well and invest time in it. It requires considerable information gathering and analysis. If you don’t have this time and want to develop this expertise, partner with someone with the tools to help manage your price risk.
Whatever your marketing decisions have been, they were right for you at the time. Next year and the year after will present different challenges and opportunities so use what you have learnt this year for future success.
Originally published 4 October, 2018
For further information call the AWB Grower Service Centre - 1800 447 246
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