21/22 Barley Harvest Pools Finalisation Results

CBH has finalised and paid out remaining equity for the 2021/22 Barley Harvest Pools. 

The final equities* are as follows:

*Pool equities are quoted FIS, exclusive of any quality adjustments

 

*Pool equities are quoted FIS, exclusive of any quality adjustments

The Barley Harvest Pools were strongly supported by growers and we would like to thank all the growers who participated and we hope that the final results for both the No.1 and No.2 pools are well received.

The No.1 final pool return has outperformed the average cash price by $66-$120 per tonne and the average harvest price by around $100-$176, depending on grade and zone.

The No.2 pool opened in early December 2021 and delivered an outstanding result for pool participants with the final pool return outperforming the average cash price by $44-$93 per tonne and the average harvest price by $79-$150 per tonne, depending on grade and zone.

The pool results are represented graphically as follows, compared to the best daily price over the period:

 

Pools Strategies

Given the anticipated record production heading into harvest, there was a general expectation by the pool management team that domestic values could be compressed relative to export values which would lead to a widening of export margins. To maximise value capture in the pools, the strategy from the beginning of the season was to focus pool participation on export sales where possible.

Late in 2021, barley values generally were supported by the implementation of the Russian export tax and malt shortages out of Europe due to scorching drought during their production season. As tensions escalated in the Black Sea region early in 2022, customer demand started to pivot towards Australia reflecting concerns over supply. When the conflict began in late February, supply from the Black Sea effectively stopped overnight. This led to a surge in prices as end-users scrambled to replace forward cargoes, which also saw customers booking further out the curve than typical. This strong customer demand allowed the pool to make sales much more quickly than initially anticipated. As a result, the pool was effectively fully committed through May. Given this coincided with the peak of market pricing, overall it proved supportive of pool equity.

Logistical Challenges

Whilst the market outcomes this season were generally beneficial to pool equity, various logistical challenges over the course of the season did have a larger than usual negative impact on pool equity. Most ports faced logistical challenges at different times of year, leading to significant demurrage charges and in some cases contract penalties being incurred and this has been reflected in the storage and handling charges applied to the pools in each zone. As the No.2 pool had a majority of tonnes executing during the window where logistical issues were at their most extreme, the storage and handling charges incurred by the pool are higher than that of the No.1 pool.

This season the currency hedging strategy of the pool tended to align with the commodity hedge strategy.

When the No1 pool opened in November, AUDUSD was around 0.75c. Over the month the pool gradually hedged positions as physical sales were committed with the currency trending lower over this period. In late November the pool opportunistically added a chunk of hedging when AUDUSD dipped down to around 0.70c. This allowed the pool to reduce the pace of hedging as AUDUSD moved back towards 0.73c in mid-Jan.

In late January the currency again fell to around 0.70c, which saw the pool again took the opportunity to ramp up hedging to the upper end of the mandate. This helped to minimise the negative impact on pool equity over the next few months by reducing the hedging task whilst the currency appreciated steadily, peaking around 0.7650 in early April.

The pool then gradually accumulated the rest of the hedge program as the currency turned lower from April onwards, ultimately falling towards 0.67c by early September.

Currency – No.2 Pool

This season the currency hedging strategy of the pool was impacted by the faster than anticipated pace of physical sales.

Since the start of the pool in early December, AUDUSD proceeded to head from a low of 0.70c up to around 0.73c by mid-January. This placed the pool on the back foot with regards to currency hedging, although it began to lift its hedge percentage through the back half of January as AUDUSD shifted back towards 0.70c.

However, the low overall hedge percentage in the pool meant it was exposed to the shift higher in AUDUSD from early February. Ultimately, the currency trended higher until early-April when it peaked around 0.7650c.

As physical sales were committed at an accelerated pace through this period, the pool was compelled to increase its FX hedges to stay within a mandated range of the physical sales percentage. Being compelled to increase currency hedging at higher exchange rates as the pool continued to make physical sales did have the effect of offsetting some of the benefit of the increased sale values being achieved by the pool at that time.

Mandate Charts