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General Comments – Newsletter November 2017

This year has reinforced the folly of designing production systems from the top down, based on commodity prices prevailing last year or early this year, rather than from the bottom up based on physical factors.  It has been witnessed yet again that grain prices or indications early in the year rarely have any correlation with prices available at harvest.

Rural Management Strategies consultants have always been strong advocates of designing production systems based on agronomic first principles, rather than based on predicted grain prices for the following harvest.  Sound crop rotations which exploit the synergies between certain crop sequences (eg. Canola following pulse crops) and which incorporate different modes of pest and weed control, will be less costly and therefore carry less risk.

Even after last year which was so wet that one wouldn’t have thought that brown manuring pulse crops would be of great benefit this year, there have been several examples observed where canola this year has benefited significantly from being grown after a brown manure pulse crop.  There are obviously factors other than moisture and Nitrogen involved here, which require further research and understanding.

The mixed weather fortunes of farmers in the north of the state compared to those in the south or in Victoria, has resulted in there being significant differences in the basis component of grain prices at Newcastle and Port Kembla, compared with those at Melbourne and Geelong.  This demand for grain from central and upper southern NSW to go north, has resulted in basis levels at Port Kembla (PKE) being around $30/tonne higher for wheat and barley than that at Melbourne Port.  Therefore growers just south of the Murrumbidgee River who normally sell into the Melbourne and Geelong Port zones, should consider selling into the Port Kembla zone, as for many, the extra road freight from farm to central receival depot in the PKE zone, will be significantly less than the higher basis available in the PKE zone.

When selling grain at particular central receival depots, growers should preferably sign contracts at a given price for that site, rather than at a port price less GTA price.  The reason for this is that due to the differential in the basis between the north and the south, some buyers are posting prices at particular depots in the transition zone, which are far superior to the price derived from quoted port prices, less GTA freight to that depot.