The past 12 months have proved - yet again - that no two years are the same.
After four seasons as part of the grain marketing team in Pinion Advisory, I have had four very different marketing experiences in that time, with 2021 the most volatile marketing year to date.
Australia has lucked out in many regards as most regions experienced average to above-average crops with drought level pricing, leading to the most profitable year on record for some businesses.
However the 2021 marketing year was not without its volatility - positive and negative.
There have been many conversations during the past four months that have looked into the past with longing for the return of the simplicity of the single desk.
Pre-2008, grain marketing for the entire Australian crop was done by one or two companies with pools the main option for marketing grain during this time.
Since this period though, grain markets have operated on the global stage, open to greater pricing transparency and competition, increasing not only volatility of price but also opportunity.
RELATED READING: Five AgTech predictions for 2022
The greater level of volatility that isn't going away any time soon. So, what have we learnt to take into 2022?
1. Volatility is here to stay. While we can look back at the single desk and how easy it made marketing the crop, that's not the environment we find ourselves in. Instead the ability to manage volatility becomes the priority. In a marketing period that has been drastically volatile and at huge volumes, being reflective on what's worked and what hasn't and bringing that with us into 2022, allows us to make the best possible decisions for our business.
2. Don't panic. One of the factors that made 2021 marketing 'fun' was the large fluctuations in price. The market has since recovered to an extent and allowed us to take another bite of the high pricing on offer. There was always going to be the large drop we experienced in harvest, as the trade ran out of funds and huge volumes were coming in. Looking at the global pricing drivers and not panicking has allowed us to take advantage of the pricing recovery.
3. Food security becomes number one. Empty shelves, due to panic buying, is an image that had become synonymous with the pandemic. This, coupled with concerns about droughts in North and South America, has meant many countries have renewed their focus on ensuring ample stocks through difficult supply periods, including pandemics, droughts or slow logistics. We have moved from a 'just in time' accumulation strategy to a 'just in case' strategy, leading importers to increase stockpiling mentality.
RELATED READING: Downgrade risk requires careful review of contract options
4. Logistics need planning. There is greater complexity within supply chains and more options on delivery available to growers than ever before. This level of option means needing to understand freight costs and what is going to give the best bang for buck. Also, with some commodities there was no choice but to store on farm. This means there is a need for planning on delivery options, to get the best return on the crop.
5. Higher prices mean larger movements. We've been lucky to see typically drought-type pricing in periods of the past 12 months, but also larger fluctuations. Similar to pulse markets, it was not uncommon to see $10 a tonne price movements in a day for cereals, where previously $1-2/t movements were the norm. If this high decile pricing continues, expect similar sorts of pricing movements.
This will be a different year to the last, but it will be shaped by the experiences within global markets of the past two years.
The market moves quickly, so be on the front foot from the get go with support to help manage the constant volatility.
Start the day with all the big news in agriculture. Sign up here to receive our daily Stock Journal newsletter.
Sign up for our newsletter to stay up to date.