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Making grain trading easy

12 Jan, 2012 04:00 AM
This article is part of a profile series on Agfarm. To read the other articles in this series click here and here.

FARMERS are the first to concede that finding a good deal in the grain market is hard work, so increasingly they're leaving the task to a new breed of grain traders acting as their deal brokers.

Riding with the strength of the independently-based Ruralco farm services network, grain trading business Agfarm has found itself a successful niche in the fiercely competitive and often complicated grain market.

Agfarm promotes itself as an independent broker negotiating good deals for growers who don't like wasting time constantly tracking grain price movements or chasing down the best payment options for their crop.

Rather than aligning itself to one particular buyer its traders compare the price options on a grower's behalf, organise the a sale to the bidder with the best all-round deal, then take one per cent commission for their work.

While small scale independent traders have brokered grain for years, Agfarm's large network and "honest broker" philosophy has growing appeal, even among buyers who can link themselves to pooled tonnages readily available from growers Australia-wide.

"The best grower feedback we get is how much they like having an independent service sourcing prices from up to 150 buyers, while buyers like accessing the grain they need without having to seek out 150 different growers," said Agfarm managing director, Bob McKay.

The 20-year-old company's grower broking business evolved in the lean drought seasons between 2007 and 2009 when wild fluctuations in the deregulating export wheat trade left a lot of growers burnt and confused by price slumps, grain deals that couldn't be honoured, and multiple new traders offering a plethora of price options.

"As a trader we'd always tried to do the right thing by growers but with so many new buyers and changing market conditions prevailing we saw a chance to modify our business and actually work for the grower," Mr McKay said.

"There wasn't really anybody representing growers on a broad scale."

Although its initial client base strength was in Mr McKay's home turf of central NSW, Agfarm gained a lot of southern traction by teaming up with the Victorian Farmers Federation to give VFF members non-aligned trading choices and guidance in the increasingly diverse market.

With the new business strategy gaining popularity and requiring more marketing expertise on the payroll, plus a capital injection to strengthen its balance sheet, Mr McKay talked to Ruralco, the company responsible for CRT's farm supply network and a growing portfolio of independently run rural services businesses.

His timing coincided neatly with newly-arrived Ruralco Holdings managing director John Maher's plans to bolster that company's profile in grain and water trading.

"At the time we were being courted strongly by some big international and local grain sector entities who wanted to get a foothold in the market by leveraging off our reputation and geographic spread in the bush," Mr Maher said.

But while rural agency rival Elders had partnered with German grain trader Toepfer, and Landmark was part of the AWB group, Mr Maher was wary of aligning Ruralco with just one downstream buyer.

"It would be a bit like an abattoir promoting itself as a livestock agency," he said.

"The international interest in Ruralco was all very complimentary but our business model is all about servicing growers and Agfarm's approach was a much neater fit."

Agfarm, which became a Ruralco joint venture business in 2009, has enjoyed enviable loyalty and growth from eastern States growers, lifting its grain volumes 500pc in 2010-11.

In 2011 it opened an Adelaide office (its seventh) to support Ruralco's Platinum Operations agency client base in South Australia, and this year expects to broaden its Western Australian footprint.

"Our SA growth has been great and I think we'll see quite a bit of activity in WA in 2012, particularly as the Agfarm Advantage pool options catch on," said Mr McKay.

"Growers tell us that when they do the numbers their best profit results come from concentrating their time and energy on their machinery technology and farming skills to achieve better yields.

"They can't afford to be trying to pick markets and comparing payment arrangements between multinationals, containerised exporters, feed users, local traders, millers and others.

"It's a far more complex environment than a decade ago when growers probably had just two or three buyers to choose from and AWB's export pool as a fall back option."

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looks good at first glance - but from what i understand they have taken in heaps of tonnes and they state they sell an equal proportion of the grain each month! i.e. the 5 month plan they sell 20% each month.

could be that major buyers in the market may try to take advantage of that formula!

Posted by the advocate, 14/01/2012 10:00:29 PM
Mr McKay the middleman should be pleased with VFF.

Chair of VFF Grains Mr Andrew Weidemann has played a key role in Agfarm's advertising campaign.

Mr Weidemann also played a key role in the campaign to rid grower control and ownership of AWB Ltd.This has eventually seen our iconic organisation fall into the hands of Cargill.

Victorian wheat growers who are receiving sub standard grain prices and seeing their logistics costs soar must be left wondering about Mr Weidemann's obvious conflict.

Posted by Jock Munro, 16/01/2012 7:35:09 AM

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AgFarm managing director Bob McKay.
AgFarm managing director Bob McKay.
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Q: What do you think is the most important big issue confronting farmers at the moment?

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