AWB will run two major wheat pools this year, one in eastern Australia and one in western Australia in order to capture natural advantages each zone offers.
General manager for pool services David Johnson said the western zone would focus on exports to Japan, South Korea, Indonesia and the Middle East, while the eastern zone would be designated primarily for domestic use and export to New Zealand, the western Pacific and the Middle East.
While he said there would always be a role for pools, Mr Johnson told growers at a meeting in Horsham that he expected the cash market to be the big mover in a deregulated market.
“With the addition of the multi-national trading houses there is going to be more liquidity and depth in the market.”
He said there would be a move towards cash markets in the medium term, but that farmers would have to move away from their mindset of harvest marketing and look at the American model where grain is marketed throughout the year.
“There’ll be a move towards buyers looking to spread out their purchases over time, rather than just focusing on the harvest period,” he said.
In the shorter term, Mr Johnson said pools would play an important role in allowing companies to accumulate grain in light of the worldwide credit crunch, making it harder to access affordable credit.
Farmers will have to monitor the market carefully, according to Mr Johnson, due to the added volatility which will see prices changing rapidly.
Even access to AWB’s pools will differ markedly from those of the past – with the removal of guaranteed access dates, both for physical deliveries and for pre-commitment premiums.
Mr Johnson said offering set dates made it difficult to shore up tonnages until the last minute, which was counter-productive to AWB’s aim.
“Last year, with the pre-commitment, which had a cut-off date, we found that farmers, being sensible people, waited right up to the end before committing their grain, which obviously made it difficult for us to know how much wheat we were going to get and hard for us to start marketing it.”
Southern growers at the Horsham meeting expressed concern that this set up would see international orders filled up by northern grain and plummeting cash price grain values and limited pool opportunities by the time the southern harvest kicked off.
While acknowledging it was likely there would be a harvest drag on pricing, Mr Johnson said companies would make money on the tonnage they attracted into the pools and so would try to ensure it remained attractive for farmers right across Australia.
“I don’t think it's going to be a problem, we’ll be after as much grain as we can get – obviously we make our money on each tonne of grain we sell so it's not in our interest to shut off our pools early.”
Quality-wise, Mr Johnson said while there may not be a system quite like Golden Rewards, the market would be the leader on quality.
“Obviously there is a premium out there for high protein wheat and I think the market will send out the quality signals it wants.
In other areas, AWB has stuck close to its previous national pool with the two regional pool products, focusing on security of payment, harvest finance and payment flexibility as its key selling points.
Mr Johnson estimated the amount of cash provided with harvest loans would decrease from 82pc to between 65 and 70pc, due to the increased cost in the cost of credit, but said otherwise most things would remain the same.
Similarly to the procedures of the last few years, the pools will be run as trusts.
This will secure the growers’ stake in the pool.
Other marketing products include forward multigrade and fixed grade cash contracts, cash, and the $10 per tonne early pool commitment premium, among others.
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