Senwes Scenario June/July 2018 - Page 56

MARKETS Opportunities after harvest time Article written: 20 April 2018 Producers are harvesting at present and marketing decisions have to be taken as to the tonnages to be sold in order to meet obligations. This is not always an easy decision - particularly in a season such as the present one, where a producer probably has to sell more than his long-term average production in order to cover input costs. By Hansie Swanepoel Senwes Grainlink Market Analist P roducers have to determine how many tons they need to be sold and how many should be stored to be marketed at a later stage. Unfortunately a large number of produc- ers are not in a position to store grain in order to sell it at a later stage - the cash flow requirements are simply too high. As a result they have to consider alternatives which will still allow them to utilise any possible upward price movement. MARKET BACKGROUND The latest supply and demand figures released by the NAMC, can be found at: http://www.namc.co.za/category/ research-publications/supply-demand-es- timates/ It is evident from this information that there will most probably be a surplus of maize. In terms of oilseeds, the avail- ability of sunflower seed may become problematic later in the season, but more than enough soybeans will be available. The average seasonal movements for maize and sunflower are reflected in Graph 1 and Graph 2 below: It is evident from the graphs that maize prices will possibly move sideways up until planting time. The price of sunflower seed reflects an upward potential. POSSIBLE STRATEGIES Sunflower Due to the large movement which is expected in respect of sunflower, strate­ gies which will be able to utilise the full Graph 1: Seasonal movement of December WM. Source:Thys Grobbelaar 54 SENWES SCENARIO | WINTER 2018 upward movement, should there be one, should be considered. The different options are as follows: ➊ Deferred pricing This is a contract where tons are deliv- ered and sold now, but are priced at a later stage. The producer shares in any increases, but unfortunately also in decreases. Storage costs and interest can apply in respect of this contract - make sure of this ahead of time. ➋ Cash flow transaction In terms of this contract tons are deliv- ered and sold, but are repurchased in a future month by means of futures. The future contract is protected with a put option. This product has a limited loss potential, which has to be retained as well. The remaining funds are paid Graph 2: Seasonal movement of December sunflower. Source:Thys Grobbelaar