EMERGING grain marketer Emerald Group has released another new marketing product, with the launch of its ‘New Gen’ canola contracts.
The canola contracts are available through Emerald Group, and its joint venture partners, SQP in Victoria, EP Grain in South Australia, and newly launched business Southern Ag Grain.
They are collectively due to begin business at the start of November, with contacts designed similar to a cash and pool hybrid agreement.
Emerald Group managing director Mick Cattanach said the major driver behind developing the products was reducing price volatility and thereby lowering marketing risk for growers.
The three new products on offer, tailored for different marketing priorities are:
• Average floor:
Prices the contract each day during the pricing period at the higher of either the daily floorprice or the Winnipeg July 2010
futures contract’s daily settlement price, the Winnipeg exchange being the equivalent of the Chicago Board of Trade in wheat. The higher of these prices is then averaged. This option has a lower level of customer price control.
• Swap:
This product allows customers to choose to price all or part of their contract on any day. Customers opt to set a price for all or part of their contract at either the daily market price or at a target price. To fix all or part of the contract or to set a target price, customers need to contact their local Emerald merchant. If the contract is not finalised by the end of the pricing period, the Winnipeg July 2010 futures contract’s closing price on the last day of the pricing period, will be used to price the contract. This option has a higher level of customer price control.
• The 75/25 contract:
A total of 75 per cent of the contract is priced at the Winnipeg July 2010 futures contract’s daily high trade prices, which are then averaged.
The remaining 25pc of the contract is priced at the Winnipeg July 2010 futures contract’s highest trade price reached during the ‘pricing period’.
There is no floor in this product. This option has a medium level of customer price control.
The pricing period for all three products is between November 11 this year and April 10 next year.
SQP’s managing director, Ben Fleay, said the product gives growers increased flexibility and the ability to take advantage of market highs during the pricing period.
“The NewGen canola contract gives growers flexibility and control of their pricing strategy while also providing a unique blend of market exposure over time,” he said.
Mr Cattanach said the New Gen suite has been developed to fill a gap in the rapidly evolving oilseeds market.
“Growers are also changing the way they store and market their grain and the market must respond to this changing behaviour. An example is that more growers are warehousing their grain and new products must be introduced to accommodate this trend. The NewGen canola contract is one such product.”
Mr Fleay agreed, saying marketers need to offer products that meet growers' needs.
"The Australian grain market is changing rapidly and we are on the look-out for marketing options that balance risk and return for the benefit of our grower customers, and this is a balance of security, risk and control."
The NewGen canola contract is available to wholesale customers committing over 200 tonnes.
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