Forgot EPRs when making pool decisions

Hannah Janson, ProFarmer senior analyst, said this means that more than ever growers need to do their due diligence about what pool product they use.

“We need to start think of grain managers like fund managers,” she said.

She said ProFarmer had recently released their fourth annual Australian Grain Under Management report and one of the key messages was that growers needed to understand how the various pools stacked up against each other.

“Transparency and adhering to their mandate are the most important things, so farmers can get a handle of what it is they want out of a particular product,” she said.

“It is critical growers choose a pool with a strategy and risk exposure matching their risk appetite.”

Ms Janson said ProFarmer actively advised against the use of estimated pool returns (EPRs) in the decision making process.

“These are just estimates, there is no guarantee of final performance so we don’t see them as being particularly useful.”

She also advised that growers take time making their pooling decision.

“It’s best to warehouse your grain and have a think about your options.

“If you are worried about a drop in the price, then perhaps you are better just cashing the grain immediately rather than looking at pools.”

The first half of the report is out now, with the following part, assessing previous pool performances, available in December.

However, Ms Janson said previous performances above the market were not a guarantee of success.

“What you need to look for is a product that sticks to its mandate, you can then choose the product according to what you see as your specific needs.”

She said the 2016 report has had the highest level of participation yet, with 11 pool providers providing information on their organisation and their products. This is up from nine last year.

“Our questionnaire is quite onerous, and it hits pool operators in their busiest time of year, so we are stoked with the level of participation this year.

Pat O’Shannassy, Grain Trade Australia (GTA) chief executive said all GTA members had to abide by a code of practice including a segment on providing pools.

He said the ProFarmer report was welcomed by the industry as providing independent analysis on the grain management sector.

“Commerce runs on two things, reputation and confidence, this report ensures the trade are accountable for their reputation and that growers can use pool products with confidence,” he said.  

Ms Janson congratulated the pool providers for giving the information required for the report.

“The fact pool providers are willing to provide detailed information about their products to a third party for independent analysis, provides an indication of the willingness by the majority to improve transparency in this industry”, she said.

Recently ProFarmer estimated pools have occupied as little as 10pc of the national crop.

With better transparency and understanding of the operators and products, Ms Janson said she felt these products could occupy 20-30pc of the crop, especially this year with depressed cereal prices and large volumes of grain to market.

“As harvest winds up in some parts and picks up in others, many growers are looking for tools to help them spread their price risk over the marketing year. Pools or managed products are one tool many growers will look to utilise in order to achieve this.”