Grain growers could lose more than $1million with wrong marketing decisions

Australian grain growers facing their second harvest in the deregulated wheat market are at risk of losing hundreds of thousands of dollars without the right cash flow and budget management tools.

‘Before deregulation, a grower producing 5000 tonnes of wheat at $200 per tonne with a 20% variance through the year was managing $200,000 worth of risk,’ says grain industry analyst Richard Koch from Profarmer.

‘Under the new deregulated system, the same farmer would be looking at $400 per tonne with a 60% volatility, leading to a difference between the top and bottom of the market of $1.2 million.’

The strain of this increased level of risk is already starting to tell, according to David Warburton, managing director of the Australian agricultural software company, Agrimaster.

‘With deregulation, all the risk is shifting away from agribusiness and towards the farmers,’ he says. ‘We’re getting calls from growers who are beside themselves with the stress. Their frustration levels are rising daily and often they’re not sure what to do.’

Agrimaster is offering support to Australian grain farmers through its Grain Calculator, a tool within the Agrimaster cashbook, budgeting and online banking software.

‘The Grain Calculator lets growers put in a number of different options related to selling their grain,’ says David. It takes account of the price, shipping, interest, grain selling costs, pool distribution, timing of payments, GST and so on. Every option open to a grower has a different combination of income and costs and the Grain Calculator lets the grower see the outcomes of each decision.

‘Right now growers simply can’t afford to be blasé about their cash flow because the risk is far too high. But they are being presented with so many options. Without a good financial model, how does a grower know if it’s better to take a low price in cash or a higher price later on? Without a cash flow forecasting system like Agrimaster they’ll be blind guessing.

‘For example, many growers would use the price being offered as the basis of making their decision. But in fact many grain marketing specialists would advise that grain selling choices should be based first on liquidity and secondly on cash flow, while price comes third in the decision making process.’

Agrimaster is offering online demonstrations and seminars for both existing Agrimaster users and growers who have not yet used the software product.

‘We will be running training sessions called Managing Grain Finance right through the harvest season which will teach existing Agrimaster users how to use the Grain Calculator,’ says David.

‘Growers who haven’t used Agrimaster can log on to www.cashflowisking.com.au and request a free online demonstration, or call Agrimaster direct on 1800 110 000'.

‘Good financial management is critical in this deregulated market. Australian growers who don’t have a reliable cash flow forecast and the ability to measure against their forecast on a weekly and monthly basis risk getting into trouble very quickly.

‘Making the wrong grain choice now could cost up to five years in income.’