How to Sell Grains in Australia

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How to Sell Grains in Australia

You’ve worked hard, you’ve had a great harvest, but how do you sell your grain? How do you make the most of the blood, sweat and tears that has gone into your annual crop ensuring you get the best price for your product? 

Where do you sell your grain?

As industry experts, we take a look at how you can best sell your grains in Australia, achieving the best process and getting the most out of your product. 

Four ingredients to successful grain selling

Many experts have differing views on how to sell grain effectively. As grain marketers ourselves, the team at Grainwise have our own preferred, tried, and tested ways to sell the common commodity. However, one thing the vast majority of grain marketing experts have in common is that they mostly all agree that there are four key ingredients to selling your grains successfully. 

These four key aspects are detailed below. 

  1. Know your product 

As a grower it is imperative you know the key attributes of the product you’re selling. This will put you in a strong negotiating position. Knowledge is power, so write it all down and have everything in your records. 

This advice, whilst relevant across all commodities, is pertinent for the grain market. As you are the grain grower, you know what sets your product apart. It may be the particular years conditions for example that make your product some of the best quality on the market in comparison to others. Its all about knowing how to demonstrate the to the market. 

  1. Building a Marketing Strategy

Growing grains in Australia has become more and more volatile in the past decade owing to changes in climate patterns like heatwaves and flooding.

There are grain marketing tools out there that farmers can use in order to deliver a fixed number of tons of grains to buyers. However, these tools sometimes come with their own downsides. If the grower is unable to meet the tonnage promised at the time of contract, they may have to incur heavy penalties, cutting into their profit margins.

In order to sell at high profits while avoiding any unwanted penalties, growers need to have a solid marketing strategy in place before they go to market.

Your strategy will depend on a few different things. There’s no one- size-fit-all strategy that you can copy-paste. Your strategy will depend on a few different factors –

Your Risk Appetite

Some farmers are comfortable with receiving a 12-month average price for their crop, and selling upon harvest, avoiding unnecessary risk, and avoiding having to store the grains for long periods of time. This is a low-risk-low-return seller. Others may want to get maximum return for their harvest, so they may be willing to wait for the right time to sell, store their grains in Silos, and make a deal when the price is most favorable. Before building a Marketing Strategy, one has to be realistic about one’s own risk appetite for grain selling.

Cash flow situation 

Your Marketing Strategy will also depend on your cash flow requirements. Does your farm business have immediate need for cash post-harvest? In this case you might have to be ready to sell right after your harvest. If you are in a comfortable position with your cash-flow, and do not have many payments that need immediate attention, you have the luxury of waiting.

Once you have figured out where you stand in terms of your Risk Appetite and Liquidity needs, it’s now time to decide how you are going to sell.

  • Selling post-harvest – As mentioned above, this is a low-risk way to earn cash upfront for your harvest. The grains market is subject to market fluctuations, so you may not receive the best rate at this time, but you will be safe from speculation, and also from the trouble of having to invest in silos and storing your grains.
  • Forward Fixed Price Selling – The idea is pretty straightforward – the buyer makes a deal with the seller to buy a certain amount of grain sometime in the future. As a seller you will be storing grain for a while in your facilities, so when choosing the option of Forward Fixed Price Selling, you will need to make sure that the price you are receiving is worth the cost and the trouble you are going through to store the goods. There is always the risk that the seller is unable to deliver the agreed quantity of grains due to infestation or any other reason. In such cases, usually the contract deems that the seller pays   the buyer the difference in amount.
  • Futures Contract – When the buyer and seller trade on a Futures Contract, all trading is done through the Australian Stock Exchange (ASX) or Chicago Board of Trade (CBOT). Sellers auction their produce on the board and the buyer will bid on it. The price is determined by the Board that the goods are being traded on. The thing to keep in mind for sellers is that you must maintain something called a ‘Margin Call’, at all times with the Exchange, as a safety deposit, which may cut into your day-to-day cash flow.
  • Swaps – A Swap is when a bank or merchant will trade a Futures contract expressed in A$ per tonne, not the normally used ‘cents per bushel’. A Swap is a high-risk, High-return option, and banks may require the grower to pay a substantial amount of accumulated margin call amounts.
  • Options Trading – An Option is the Right to buy or sell the Grains at an agreed price (known as a Strike-Price) on or before a particular date. Options are also trade through a Board or an Exchange.

Note that the grains market is volatile, so it is important to be flexible with your Marketing strategy and adapt as you go.

  1. Get in touch with a Grain Marketing Expert – Such as the Grainwise team

According to Grain Marketing Expert Josh Gordon, it is wise to talk to a few Grain Marketeers before you start your growing season. Often these experts will have a good idea about price volatility and can educate you on which crop may be more or less profitable to work with in the coming season.

He recommends keeping them in the loop throughout the season and giving them updates about your work. This may help you sell at the right time to the right people.

  1. Buyer Due Diligence

Gordon also suggests selling only to reputable buyers and to buyers that you trust. One way of vetting a buyer is by making sure they are a member of Grain Trade Australia.

When working with a new buyer, it always pays to ask around about them with your peers, other marketeers, and stakeholders.

Selling grains in Australia, whilst seemingly complex, is actually relatively simple, so long as you have a great grain marketing team behind you. The team at Grainwise have over 14 years’ experience in Grain marketing. Our dedicated and experienced grain marketing team understand that growing quality grain takes a lot of work, and we understand that time is precious, particularly for grain producers, which is why we offer a comprehensive grain marketing service, assisting grain producers to obtain the best rates and maintain high levels of profitability for their grain harvest.

Avoiding grain marketing mistakes, will ensure that you are well equipped to make sound and positive grain marketing decisions, that ensure the longevity of your grain operations, and farming future. Selling grains need only be one part of the process, a part where you have adequate and reliable support to achieve optimal results. If you would like to hear more about our grain marketing services, please contact us today!

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