As is tradition, I like to wrap up the year with my 3 biggest learnings from the season.
- Farming doesn’t have a marketing problem
- Decisions made on facts, consistently trump those made on emotion
- Yield is king
Today I’ll start at the bottom of the list, and if you remember this was on my 2018 list also.
But this year has really hit home. We’ve had days where we’ve sold AGP1 at the same money as H2. Barley weighing well, but has protein too low for malt, can still fetch malt prices in the domestic enduser market.
Last year I talked about yield being a non-linier driver of gross revenue, or put simply, more yield means exponentially more gross profit. While this is still very much the case, money spend on growing a bigger crop is more often than not very well spent (I’ll talk more about cost scrutiny in number 1 next week). For now, I’m more meaning that if there is a quality vs quantity battle, go for quantity.
“Gone are the days of Australian grains fetching a big premium on the global human consumption market.”
I still think it will change one day, but that will be when the average consumer is prepared to pay significantly more for a loaf of bread grown in the Great Southern, blockchain tracked right the way from the paddock to the kitchen. But that’s years away being a viable alternative to yield.
Every year, more and more of our grain is being used as livestock feed, both domestically and in South-east Asia. Bunge are buying OAT2/3 @ $370/t for feed markets, while we’re holding out for $400/t in the human consumption OAT1 market.
Malt barley supplies were the tightest they have been in years, but they only traded out to $35/t over feed for the preferred malts.
I can’t see this trend reversing any time soon. Expectations are that within 10 years, Australia will consume more grain than it exports. This isn’t in the form of a lot of trips to the bakery and pub however; it’s predominately livestock feed.
The point of this articles is to remind you that genetically, higher-yielding varieties are going to trump higher-quality varieties. The grain still needs to be of quality, in fact livestock feeders are emphasising higher test weights and lower screening more and more, but if you’ve got an extra couple of hundred kg’s/ha of yield, you’ll outperform getting a few more dollars for a premium human consumption grade.
I wonder if this might even become more applicable to canola in a few years. We’re consistently growing higher oil canola, but the crushes extraction rates are declining. We used to have oil bonifications capped at 44%, and I wonder if maybe we’ll see a return to this one day, because the crushes struggle to get that extra 6% oil out of a 50% load, but are still paying for it. Meanwhile the meal has become more of a product for them, and less of a by-product. Ring either of the crushes in WA at any time of the year, and you’ll be able to buy oil much easier than meal.
Infact, the same can be said about oat mills. Oat husk used to be a by-product of rolled oats. Now it’s a valuable fibre for the feed market and makes up >25% of the value of the product, but weighs less than 10%.
Bottomline, position your farm in the years to come to capture the rewards of the market. Quality is not being rewarded like it was 15 years ago.