GRAIN CO-PRODUCTION UPDATE - Issue 8

Dear Farmer

COMPANY ANNOUNCEMENT: AACL Executes $150M Minimum Funding Agreement with Glencore for next Three Seasons

AACL Holdings Limited (ASX: AAY) is pleased to announce that it has successfully executed a new funding and marketing agreement with Glencore Grain Pty Ltd (Glencore) for the next three seasons, with a further three year extension able to be agreed.

The agreement follows AACL’s previous 2010 season funding and marketing arrangement with Glencore, which was executed earlier this year on 6 July 2010.

Under the terms of the new agreement, Glencore will provide funding for AACL’s Grain Co-Production (GCP) contracts for 2011 to 2013. AACL and Glencore will continue to partner to market the grain, utilising Glencore’s worldwide marketing expertise.

The new Glencore facility will provide a minimum of $50 million per season commencing in 2011 and will be combined with funding from retail and other wholesale raisings.

Click here to read the ASX Announcement in full.

Grain Marketing - Market Update

Whilst global wheat supplies are at historically very tight levels, the lack of any fresh fundamental news for the wheat market has seen the price soften over the past couple of weeks. The end user is becoming more comfortable with the current supply situation and is rationing demand at the higher prices. Softer global values coupled with a continually strong AUD has seen domestic prices under pressure. Spreads to higher protein wheat have increased significantly and this is also being reflected in the domestic market.

Domestic feed barley values have softened however, global feed grain values are being underpinned by the corn market. Corn has the largest tonnage in terms of both production and consumption of all grains and oilseeds. As a result of consecutive seasons of demand outstripping supply, current estimates of corn have continued falling to historically tight levels. This has led to rallying of the corn market which will continue to support feed barley values. Malt barley spreads have widened significantly in Western Australia due to supply concerns.

Corn is a spring crop competing with soybeans who are the main driver of the oilseed market. The fight for planted area is maintaining soybeans high value and other oilseeds such as canola.

AACL GCP 2010 Grain Price Estimates

Updated GCP 2010 Grain Price estimates will be provided on Monday 1 November. Refer to 'Harvest Process' below for further information.

Harvest Process

On 1 November, AACL will release the estimates of price and costs that will be utilised in the calculation of the Net Delivered Value for grain produced from AACL contracted areas at harvest time. Estimates of freight and other costs will be as close to anticipated actual costs as achievable.

After completion of harvest and AACL's receival of your Harvest Declaration Form, AACL aims to pay the Harvest Payment due, along with making a 70% distribution from the 1 November estimates towards any Farmer Bonus - Harvest payment, within 30 days.

Following this, AACL's grain marketing team will then aim to make distributions on 25 April, 25 July and 25 October. AACL may be able to increase the amount distributed to farmers from the 70% made at harvest time on these same dates. It is also AACL’s intention to finalise the pool, market conditions allowing, by 25 July.

The price of seed retained will also be set on 1 November and based on an average price for grain in each port zone. This price will apply for all seed retained regardless of average grade delivered and will not change over the harvest period. This practice should prove easier than the method used last season, where the price for seed was calculated from the average grade delivered and then subsequently adjusted. 

For further information, please contact AACL's Grower Services.

Harvest Inspections

Harvest inspections are now underway. AACL and contracted agronomists are inspecting crops pre harvest to fine tune estimations of expected yield and quality. These estimates assist AACL in making grain marketing decisions as well as setting expectations around actual harvest results per contracted paddock. In cases where low yields are likely, inspections clarify the best approach to effectively recover grain value. If you are expecting low yields and are concerned about harvestability, please contact AACL’s Grower Services to discuss ASAP.

REMINDER: 2010 Harvest Policy

The 2010 Harvest Policy was distributed on Thursday 30 September and stipulates that farmers must notify AACL when commencing harvest on AACL contracted paddocks.  

• To view the 2010 Season Harvest Policy for West Australian farmers, please click here.
• To view the 2010 Season Harvest Policy for Eastern States farmers (South Australia, New South Wales and Victoria), please click here.

For Eastern States only - please note: there has been an amendment to 'Key Point 2' of the Eastern States Harvest Policy. Please be aware that AACL provides three NGR cards to all first year farmers. Obtaining any additional/replacement cards is the farmers responsibility. AACL will provide the form for new or additional cards upon request.

Should you have any other questions in regards to this email, please contact your local Regional Area Manager or Grower Services on 13 000 GRAIN (47246).

Yours sincerely

SIMON FOLEY
General Manager - Product Services