Traditionally, consumers of grain such as dairies, piggeries, feedlots and intensive grazing properties have been exposed to the market fluctuations in the price of grain. When a drought hits, the price goes up, and consumers face massively increased feed costs to add to the other stresses induced by drought.

With the introduction of the Australian Stock Exchange (ASX) grain futures contracts, consumers now have the option to reduce their exposure to increased grain prices during drought. The ASX offers futures contracts for Feed Barley, Milling Wheat, Feed Wheat, Canola and Sorghum, allowing consumers to hedge prices when the market is stable to avoid the peaks when the market rises.

A hedge using the ASX requires the following steps:

1. Establish an account with a broker
2. Estimate consumption levels for the following year
3. Determine target prices
4. Determine the most appropriate contract. January Feed Barley or Milling Wheat futures have the greatest liquidity. You may like to use Futures, Options or Swaps.
5. Determine what percentage of estimated consumption you wish to hedge
6. Place your orders with the broker
7. As the season progresses and consumption levels and market prices become clearer, you should increase or unwind your hedged position as appropriate
8. As expiry of your contract nears, you will either cash settle or take delivery of your open contracts as desired

For more information please contact the ACU Office or visit:

Australian Stock Exchange Grain Futures