Comparing pool returns with alternative marketing methods is like trying to herd cats. Some pools pay early commitment premiums with fixed washout costs, some pay quality increments and some don’t. In addition, costs are dynamic, payout rates differ and what do you compare them against.
ProFarmer has purposefully stayed away from this area because it is very costly to do a thorough, full and fair analysis and it is an area fraught with danger from a litigation point of view. The cynic in us suggests that pool managers don’t make it easy for us to compare returns, although to be fair many of the innovations have been used to differentiate products. Anyway we haven’t had enough time to properly assess the performance of individual pool managers in a deregulated environment – nothing before 2008/09 pools can be used as a measure because the environment prior to that was different.
Grain Trade Australia (GTA) established a committee to work on improving pool transparency about 4 years ago. I am not sure whether they actually meet but to say the pace of change has been glacial would be a gross overstatement. The only thing they have agreed on is to quote pools on an FOB basis net of management fees…Wow!
At the Pastoral and Graziers Association Conference (PGA) this year I outlined a number of areas where I would like to see Pool managers improve their performance and transparency:
• Better articulate their strategy
• Co-ordinate release of estimates
• Industry standards for the calculation of estimates/costs
• Make it easier to assess performance (statements on pool entry/exit, quarterly updates)
• State pool size
• Adopt an industry auditor (someone who understands how grain pools work and can spread best practice across the industry)
I heard this week that some 1mmt might have already been signed up to early commitment pools – a staggering figure when we don’t even know how 2008/09 pools have performed. Maybe this is too much, I was thinking about 300-400,000t. But if it is as large as 1mmt, I really wonder about the logic of this. The end pool return pays the premium and most of this will be based on the post harvest marketing period. With prices at seasonal lows what tricks will pool managers perform use to lift current returns to reasonable levels?
The past year has shown us that pool managers don’t have any magic formulas to outperform cash markets, nor do they hold long-term strong and significant relationships to extract huge premiums above current cash market returns – there are no free kicks in the grain marketing game. If they did the AWB pool should be outperforming all other pools by a country mile….they did have a big head start.
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