Management
Issue No. 6 - July/September 2002
Farmers or Agribusiness Managers
by Chris Heinjus
Can any one recall farming being referred to as a ‘lifestyle’ business?
Rural Directions Pty Ltd believes this to be rapidly changing. We are increasingly dealing with a new breed of farmers that are establishing themselves throughout rural South Australia. These farmers are managers of a dynamic agribusinesses.
They often manage assets worth millions of dollars, have large inputs and inventory costs, employ labour, manage logistics, freight, production risks and commodity price risk or market risks in an increasingly confusing market place.
In addition to this, traditional grower marketing boards like AWB Ltd and ABB Ltd, are increasingly commercial and are in the process of listing or have recently listed on the Australian Stock Exchange.
This is resulting in marketing boards changing their focus from the grower to the shareholder. Storage organisations like AusBulk and GrainCorp have entered marketing and marketing boards are now building storage. This has resulted in an avalanche of new commodity risk management tools and increasing confusion for agribusiness managers.
At the same time the wheat market is now differentiating payments based on quality specifications like protein, screenings and moisture. Farmers who signed up early forward delivery contracts have no moisture, and contracts struck post April 2002 have moisture payments. This means there are opportunities for arbitrage and maximising profit.
Different buyers have different pricing scales and these vary from flat (no bonus or discounts) to higher or lower sliding scales.
This has created a whole new dynamic of ‘arbitrage’ for the farm business manager to consider. Arbitrage is the simultaneous allocation of weight notes to profit from the differences between buyers quality specifications.
Rural Directions Pty Ltd introduced a Harvest Arbitrage™ service last season to assist farm business managers with the grain deli...
