Western Australian grain growers have had a rollercoaster ride in 2016-17. A perfect start to the season was followed by a dry winter and significant frosts.
Yields have ended up average to better than average, despite some growers being hit hard by the frosts, but that’s been tempered by low grain prices.
National Australia Bank (NAB) Head of Agribusiness for WA, Matt O’Dea, said now growers had a clearer understanding of their financial position, they needed to start planning for the year ahead.
“We’re seeing a lot of grain being stored, as growers hold off on selling in the hope prices will improve. For instance, temporary silo bags have been very hard to get a hold of because of the massive demand,” Mr O’Dea said.
“On-farm storage, private off farm and bulk handlers can all be sensible options, but it’s important that growers know how to calculate the true cost of holding grain.
“There’s always the risk that prices won’t improve, and even if they do, there are cashflow implications and the opportunity cost of not having the money now, plus the cost of storage or holding fees if you’re paying someone else for space. All these have to be taken into consideration.”
For those who have sold grain, Mr O’Dea said debt repayment and Farm Management Deposits (FMDs) were popular choices at the moment.
“We’ve seen a lot of debt repayment recently which is great. It builds confidence in farmers and we actively encourage it when we speak to our customers,” he said.
“With the cap doubled last year, we’re expecting a lot more money will go into FMD accounts. Some customers are also looking at opportunities to buy new equipment or carry out significant maintenance or capital improvement programs.”
Mr O’Dea said before making any decisions, growers should consider the possible impacts on their tax position, so that was the other conversation that needed to be had now.
“Don’t wait until the end of June. There isn’t a one-size fits all approach so we strongly recommend surrounding yourself with good people who can provide advice and help plan ahead,” he said.
“Looking forward, there’s been some decent rainfall so there should be good moisture in the ground to get crops away in April/May.
“Everyone knows climate and market fluctuations make agriculture an unpredictable business, but we strongly recommend talking to your accountant, banker and agronomist about the aspects of your business that are controllable.”
Source: NAB nab.com.au/agriview