Old crop sales provide certainty

Those holding old season wheat in warehouse unpriced should look to sell that before selling new crop wheat.

When making forward sales you are achieving some price certainty, however you are also committing to deliver grain that you haven't yet grown.

If you have wheat in warehouse, focus on getting price certainty on the grain you know you have before worrying about pricing grain that you don't have.

Pricing new crop while holding old crop could possibly make sense if there was a large carry being paid in the market. If forward prices of wheat were trading much higher than spot prices.

But that is not the case.

Forward futures of Chicago Board of Trade wheat (Dec 22 and Mar 23 delivery) are now trading at similar levels to the spot month. Before the start of April, forward futures were trading at a discount.

Hence the market has been saying we want the grain now. More recently there has been growing uncertainty over northern hemisphere supply into the back half of the year pushing values higher.

Australian cash markets have behaved similarly with bids for new crop wheat contracts at similar or lower levels to traded values of old crop grain in warehouse currently.

Demand for warehoused grain remains strong, evidenced by prices of many grades trading higher and 37 different buyers purchasing grain on Clear Grain Exchange last week.

Aussie grain will continue to win business into offshore markets at current price levels and the industry remains focused on creating additional capacity to move the grain as quickly as possible.

All Australian buyers and traders continue to look for grain that can work into their sales programs or into new demand from either offshore or domestic users.

Demand and upcountry prices for warehoused grain in Australia are reflecting this dynamic with surges of strong demand pushing prices higher in areas at times that can be unpredictable.

Note if you grow more than one commodity it may make sense to hold grain in warehouse while also making forward sales.

For example, you may be all sold on old crop wheat and looking to forward sell some but holding other commodities in warehouse because you have a view on those markets.

However, the logic of forward selling the same commodity that you are holding in warehouse should be considered.