Market Check - Strategic Program adds $50 per tonne to Australian Growers

Strategic Program adds $50 per tonne to Australian Growers

Market Check released its final 2017/18 season returns for its flagship program, the Strategic Program this month with another year of impressive results for participants. The average post-harvest return across all grades and major port zones compared to the average entry price over harvest (Nov-Jan) was $50 per tonne or 21% net of all costs. Average returns across all grades in the eastern states netted participants $55 per tonne and in South Australia $46 per tonne over average harvest entry levels. These returns represent the highest post-harvest returns versus harvest since the program’s inception in 2011 and have further solidified the program as the most consistently performing pool in the Australian market.

Based on Market Check’s analysis, the program outperformed other post-harvest strategies including both holding unhedged and hedged grain and selling the average cash price post-harvest. This was a big win for the pool participants considering how aggressive the market rally was late in 2018 and magnifies the benefits of an actively managed program. Participants in the Strategic Program received the same value as if they had held everything until the end of July, which based on the market post-July 2018 very few managed to pull of.

Like each of the years before it, the foundation of the 2017/18 Strategic Program was a post-harvest hedging strategy. Based on publicly available data, this strategy has proven to outperform every other strategy over the past 10 years on average and hence remains at the core of Market Check’s approach. Outside of the hedging into the wide carries on offer in the US futures market, the pools team arbitrage the physical position between grades and within each port zone. Market Check’s Head of Strategy Nick Crundall said “significant value was again added this season through our ability to manoeuvre our position to grades and locations we believed had the greatest upside such as Victoria and New South Wales”

Market Check’s General Manager, Operations and Markets Tom Basnett commented on the strategy “our internal fundamental analysis of the domestic market told us to hold off selling down the program tonnes in the first half of the year. It wasn’t until July onwards that we initiated a more aggressive approach to our selling program, which proved to be a beneficial strategy in hindsight.”

 

Market Check gave Strategic Program participants the ability to stock swap higher protein grades and malt barley to feed grade wheat and barley. This allowed growers to commit higher grades such as H2, APH2 or LA1 which would be sold immediately and replaced with lower grades wheat or barley. The premium achieved for these higher grades versus lower grades was then locked to that growers return and they entered the program as if they had committed that lower grade. This allows growers with higher quality grain to lock in the big premiums available at harvest, while being exposed to the performance of ASW1 in the program thereafter.  This is a common approach by traders and is a big differentiator of Market Check’s Strategic Program in the Australian market.

Market Check are proud of the value the Strategic Program has added to its participants and look forward to another successful season for the 2018/19 Strategic Program. General Manager Tom Basnett said “the Strategic program and the strategies we implement on behalf of our grower participants has again proven the programs validity as a strong post-harvest marketing option for Australian growers.”

Please note past performance isn’t necessarily and indictor of future performance.

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Indo's been our biggest #wheat home since Iran was #1 in the 01/02 ssn. The prem Indo traditionally paid for Aus has been suppressed in recent yrs due to increased comp out of Argy/B. Sea. Phillippines increasing as we're exempt from tariffs other origins pay #oatt #harvest19 pic.twitter.com/7sYRyQKnJP

About 9 hours ago from Market Check's Twitter via Twitter Web App

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