Australia: ABB urges growers to consider forward contracting to capitalise on ‘global commodity boom’
Leading agribusiness, ABB Grain Ltd, announced on March 09 it is recommending grain growers consider forward contracting their 2006/2007 barley and wheat crops in order to capitalise on a “global commodity boom” currently overflowing into grains.
ABB’s general manager trading, Peter Jones, said forward prices for ‘new crop’ (December 2006-January 2007) grain were presently running at a premium to old season prices and ABB was offering to buy forward contracts at these premium prices.
“Australian wheat and feed barley markets are being led by the sudden sharp rise in US futures,” Mr Jones said. “One of the major drivers is the global commodity boom which is now overflowing into grains (and therefore may be a short term phenomenon) coupled with dry conditions through much of the US’ wheat production states.”
Mr Jones said fund managers running index funds had had a big influx of capital that needed to be employed in the market. It was believed that this flow of cash was pushing the market higher.
“As Australia is predominantly a grain exporting country, our grain prices are inevitably largely linked to what is happening in the global market and, more specifically, the US grain market,” Mr Jones said. “Regardless of the reason, the fact is grain prices have followed the US market higher.”
Currently, US wheat futures are close to their high of US 430 cents/bushel for the March 2007 contract. “The ABB basis contract provides growers with the opportunity to lock in futures close to this level,” Mr Jones said. “Additionally, ABB have developed a new multi-protein product, allowing growers to access port bids at $200/tonne* without being penalised for high segregations or moisture.”
Current feed barley 1 prices are at around $154/t (Port Adelaide)* with growers able to deliver malt barley against the contract and receive the premium available on November 30, 2006, for deliveries up to this date.
Deliveries after this date will receive the grade spread on December 15.
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