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