Outrage over wheat price gap

Jo FulwoodCountryman
Lake King grower Bob Iffla.
Camera IconLake King grower Bob Iffla. Credit: Danella Bevis/Countryman

Grain traders have come under fire from growers in the southern port zones for offering upwards of $30 a tonne more for APW wheat delivered to the Geraldton zone.

Growers in the Esperance zone have called on traders to explain the gap in prices.

Lake King grower Bob Iffla, who delivers to the Esperance and Albany zones, said the massive difference between zone prices was unfair to growers in the southern zones.

Mr Iffla has criticised CBH and other grain marketers for what he describes as a discriminatory practice with little justification.

The large cash price gaps, such as those seen in the past few weeks, would "open up the flood gates" for competitors to set up shipping ventures from Albany and Esperance, he said.

"There will be other opportunities that come up if this differential continues, and if we are forced to bypass CBH in the future then this is what many farmers will do," Mr Iffla said.

But grain marketers say the price difference was merely a reflection of market forces in a deregulated environment.

CBH marketing and trading general manager Jason Craig said there were no make-believe port costs involved in grain pricing.

Mr Craig said the issues affecting price differentials between zones were a result of a combination of various factors.

These included supply and demand factors, available shipping capacity, the number of grain buyers bidding in particular zones, the number of outlets in a zone, shipping differentials and protein premiums.

Mr Craig said the current posted prices in Albany and Esperance zones reflected that a number of buyers appeared to have purchased sufficient tonnages to meet their current requirements.

"The larger crop size plus the 2012-13 carry over from last season has exceeded the number of shipping slots," he said.

Mr Craig said stronger values for wheat this year in both Kwinana and Geraldton reflected the higher protein being delivered in those zones.

Plum Grove commodity trader David Pritchard agreed the price difference was because of the combined factors of shipping capacity and protein premiums, and he predicted growers would see more price fluctuations in the future.

But Mr Pritchard conceded the massive price gap was unusual.

"The price difference between Geraldton and Esperance is unusual, but in this new type of market you are going to see more fluctuation than in the past, particularly in the new realm of a deregulation market," he said.

"If you look at Albany and Esperance zones, there is more grain down there than capacity so we don't need to own it as aggressively and so the price goes down. It's all about capacity versus production."

Mr Pritchard said Geraldton had produced an average APW stack of 11.7 per cent protein.

"Any hard wheat that didn't go Hard has gone into the APW stack and helped that protein average stay up, whereas in the southern zones there has been more ASW production, so when growers optimise their ASW grain up into the APW grade, they drag down the overall stack average," he said.

"It takes all of those factors to affect the price - it's not just one factor in isolation."

But Mr Iffla said it was his understanding in the past, protein had only attracted four or five dollars for each percentage gradient.

"When we had high protein in the Esperance zone a few years ago, we didn't receive such a big price premium," he said

"They have an excuse for every occasion - that's the part that is annoying people.

"They have been wanting us to produce APW that was 10 per cent and above, and that's what we have done.

"In other years, when we have produced 11 or 12 per cent we have not had the benefit - it seems to be lopsided."

Other Esperance growers also say the reasons given by the trade did not justify such a massive price gap between the zones.

Condingup grower Andrew Fowler said he believed the price difference was more than just about protein and shipping capacity.

Mr Fowler said each year marketers gave growers a different reason as to why Esperance prices were significantly lower.

"There have been conflicting reasons for the price differential," he said.

"It needs a lot more explanation in my mind and the answers we have been given in the past conflict with the answer we have been given today."

South East Premium Wheat Growers' Association president Dave Cox said the organisation had received a large number of comments from growers regarding the issue, and SEPWA was seeking justification as to the reasons for such a big price difference from marketers and traders.

"SEPWA is taking this issue seriously and we are asking traders for an explanation for this huge price gap," he said.

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