Australian farmers to cash in on grain market rally
Global grain markets have rallied this week in response to the stand-off over Crimea between Russia and Ukraine. Australian farmers are set to profit. In Western Australia, a record-breaking crop was harvested over summer and many farmers have delayed selling it, in the hope of a market rally. Now it's time to cash in.
ASHLEY HALL: Global grain markets have rallied this week in response to the stand-off over Crimea between Russia and Ukraine and Australian farmers are set to profit.
In Western Australia, a record-breaking crop was harvested over summer and many farmers have delayed selling it in the hope of a market rally.
Now it's time to cash in, as Caitlyn Gribbin reports.
CAITLYN GRIBBIN: The Black Sea region is one of the world's most important grain production and export hubs so farmers around the world are watching the unrest in Ukraine closely.
LLOYD GEORGE: Ukraine's an important grain exporter so if those grain exports aren't available because of the conflict actually spreads or worsens over there, it'll impact global grain flows.
CAITLYN GRIBBIN: Grains analyst Lloyd George says the market has responded strongly this week.
LLOYD GEORGE: Grain growers in Ukraine are starting to hold onto grain now, really just as a hedge against what may happen in the future. So there appears to be a bit of a reluctance to sell. That seems to be one of the immediate impacts.
CAITLYN GRIBBIN: Do you mean to hedge, for example, against currency devaluation?
LLOYD GEORGE: Yeah exactly. Against any kind of major fluctuations in the currency.
CAITLYN GRIBBIN: Mr George says prices have lifted up to 7 per cent, which is quite significant.
Australian grain farmers are poised to cash in.
LLOYD GEORGE: The rally that we've got will be very much welcomed, and I would hope and think that quite a few growers are going to take advantage of this rallying price.
CAITLYN GRIBBIN: Dale Park is the president of the West Australian Farmers Federation. Grain growers in the state had an exceptional 2013 harvest, an all-time record.
Mr Park says many chose not to sell all their grain, instead storing some and hoping there'd be a market rally.
DALE PARK: There'd be some growers that have almost sold all of it. I don't think I have spoken to a grower yet who hasn't got any left. And I should imagine that they'll take real advantage of this bit of a spike.
CAITLYN GRIBBIN: What sort of money could some of these growers stand to make if they do decide to sell in this spike?
DALE PARK: Well we're looking about a 10 per cent rise just at the moment so that's an extra round about $30 a tonne. So that's, for every 1,000 tonne they sell, that's an extra $30,000. So it's quite a significant amount of money.
CAITLYN GRIBBIN: Does this come along very often in many seasons?
DALE PARK: No. Usually, (laughs) usually we're all looking at the other end of this. So there'll be a lot of farmers who sort of grab this and think they've almost won Lotto.
CAITLYN GRIBBIN: Analyst Lloyd George says the strong prices could hold for a couple of months.
LLOYD GEORGE: We don't know how long the disruptions in Ukraine are actually going to last but what we do know is that they're scheduled to have an election in May and there's been speculation that we may not see any resolution prior to that time.
CAITLYN GRIBBIN: In the meantime, Dale Park says WA growers will enjoy the rare moment of near-perfect farming conditions.
DALE PARK: There have been occasions but they are so far back and they happen so very rarely that no, we'll mark this one down as one of the better ones.
I'm hoping that there'll be a fair bit of debt repayment go on out of this season, but I also know that farmers will be buying more lime which means that there'll be more business for cartage contractors and spreading contractors. The money goes back into community at an incredible multiplier effect.
So for those that have a bit of grain left now, this will just be putting the icing on the cake.
ASHLEY HALL: WA Farmers Federation president Dale Park ending Caitlyn Gribbin's report.
