JC the trouble for most grain farmers as you'd be well aware is the risk inherent in paying the current price of sheep, even with the recent correction. I can remember the last big drought in WA we were shooting sheep so today's prices still have further downside if the government meddles in the trade (highly likely) and/or if we have another drought.
Buying sheep in is now too risky and that is why there is so much fallow going on in WA in the Eastern Wheatbelt the last few years, after the 2010 drought really.
So those with high debt are locked to the grain production wheel unless they are building stock numbers organically and that will take years. The government has added another level of risk as is their job it seems these days.
I took 15% on the recent spike. Anything over $300/t is getting very attractive. An east coast $290/t SWAP is worth $315/t on the WA cash market especially in a crappy year. Until it rains again (yesterday was a fizzer) I suspect most will continue to sit on their hands for this year maybe push to 25%, but pricing more 2013 looks attractive still. Most were budgeting on A$270 here in WA and that was for a meager profit. That is your equivalent of $245 as we generally add on an extra $25/t due to WA's freight advantage to Indo and the Middle East.
