COMMODITY UPDATE
Market Observations: May

It’s that time of year again where grain growers get to reset and look optimistically to the year ahead. As farmers have been busy sowing, the parallel can be drawn with football and netball clubs all over the country hoping for the perfect start to the season after a summer of contemplating what might have been and what could be. Just as in sport, the perfect preparation in a farming sense gives the best chance of getting the “wins on the board” early.

The perfect preparation means a lot of hard work and drawing on previous experience to ensure the best chance of success. As the adage goes, “fail to prepare – prepare to fail”. Sporting clubs, with their eye on the prize at the end of the season,  may look to recruit new players; try old players in new positions; improve the skill set of the group; change up the game plan and identify any potential impediments to success.

Farmers are not dissimilar with their eye on the prize at seasons end. In an attempt to achieve the best outcome possible it may mean implementing new technologies in seed, fertiliser and machinery. Use farming methods that are tried and true; ensure workers have the right conditions to excel; attempt growing new commodities with a sustainable crop rotation in mind and be diligent in combating as best as possible any pests or weeds that threaten yield potential.

With the fundamentals in place, awareness of the “game plan” is critical to maximizing all of the early effort. A sportsperson will attempt to read the play ensuring the points get on the board, with a winning margin at the end. The winning margin of a successful crop is determined by yield, but also how to read the market and choosing the best time to “take the shot”.

At times, within a game there will be the need for a defensive approach but never forgetting the overall objective will eventually be to go on the offensive to achieve the desired result. The difficulty is knowing when to defend and when is the right time to surge forward. Commodity markets are similar in that matter, it is just about knowing when the right time is to engage.

Sometimes the best opportunity for marketing success can come early in the crops lifecycle when yield is yet to be determined, but this comes with the obvious risks. Conversely, engaging the market at the end of harvest (just like waiting until the dying moments of the game to score) might mean the best time to strike has already passed.  Another marketing approach is consistent engagement across the year. This might be akin to a team having a balanced perspective, putting in an even effort across the game – a balance of defence and offence without major fluctuations.

Good marketing is utilizing the tools available throughout the crops development and as it matures, to mitigate risk and lost opportunities. Commodity markets are volatile in their nature but with volatility comes opportunity, so reading the play consistently (although often difficult) can reap rewards. Very much like the sportsperson that takes to the field or court, Australian commodities must also compete. It is a global stage where competition is fierce, where all players are striving to be better every season and play at the highest standard possible. It is not lost on Australian farmers how global influences affect the competitiveness of Australian Commodities in the market at any given time. But the greatest advantage Australian producers have is their ability to grow a quality product with an efficiency that is the envy of all other players.

As Farmers take to their own field’s this season and contemplate the marketing of their Commodities, my advice would be – Try and win the toss, kick with the breeze and hopefully enjoy a big win at the end.

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Author

Justin Fay
Commodity Manager