ASX Grain Futures and Options provide growers with the tools to help their business grow in an ever challenging and competitive marketplace. The following list highlights the key marketing issues faced by grain growers. It also lists whether there is a capability to manage the issues by using ASX Grain Futures and Options. Importantly, ASX is more than just a price risk management facility. There are a variety of important benefits provided by these markets that are available to growers whether they hedge directly on ASX or not.
|Capability to Manage|
|Marketing Issue||ASX Grain Futures||ASX Grain Options|
|No Production Obligation||Possible||Yes|
|Delivery Alternatives||Yes||Not Applicable|
|Buyer of Last Resort||Possible||Possible|
In the four years since inception there has been three years where hedging on ASX would have protected growers' returns from disappointing prices at harvest. Importantly, ASX provides tools growers can utilise to benefit from price moves in both directions.
While the primary objective of hedging is to obtain protection over the price received for grain grown. Hedging price alone is of little value if payment security is not managed and protected. The Australian Grain Industry has a chequered past when it comes to counterparty credit risk. All positions on the ASX are managed by the Australian Clearing House (ACH) to maintain the financial integrity of the market.
The price traded for ASX futures contracts is a 'track' price. All prices that trade on the ASX are available to you. Market prices can be accessed via this website or you can receive the Daily Activity Report by email. The Daily Activity Report is issued in the morning following a trading day and details the values of all trades that occurred in both the futures and the options markets during that trading session.
No Production Obligation
As a grower you would be well aware of the production risk associated with forward physical contracts. Put options over ASX Grain Futures contracts are available to lock in what is effectively a 'floor price' with absolutely no production obligation. In other words, growers can take advantage of favourable forward markets without the associated risk of a production obligation.
Unlike swaps, if held through to maturity, ASX contracts are deliverable and the owner of every sold position has an obligation to deliver grain to an applicable delivery location. ASX contracts are based on port zones in Queensland, New South Wales, Victoria and South Australia. If you live within a deliverable Port Zone and have the grain or oilseed you are able to deliver to the accredited bulk handler and effect delivery against ASX positions. This provides you with maximum flexibility when making marketing decisions for your crop.
Buyer of Last Resort
The debate to date concerning wheat export marketing arrangements in Australia has mentioned the 'buyer of last resort' functionality. ASX Grain Futures can provide you with a 'buyer of last resort" function so long as the physical grain meets the deliverable quality for the contract and is stored in an approved location. You can market your grain through the ASX market with the knowledge that the ACH will be managing the payment security.
It's time to learn more
Many growers think that derivatives are a dull topic that are difficult to understand and deliver few tangible benefits. To the contrary, the benefits listed on this page are real. As the market develops and the industry learns more about how they can be used you will realise that it is not as dull or as difficult as you may have first thought. An important aim of this website is to provide a thorough education resource. If there is something you would like further clarification on please contact ASX.