Forward Contracts – Common Questions From Buyers

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Forward Contracts

Common Questions From Buyers

Why should I forward buy hay NOW?
It is Spring – peak hay season! Spring is normally the lowest point in the price cycle
Even if it is a bumper year, the next hay season is at least 365 days from now. Hence, even if the drought breaks, we can expect strong prices between now and the next hay season. They will rise a lot if the drought continues. Right now the science is telling us that there is a better chance of the drought continuing than breaking.
When do most people buy hay?
Just like swimming pools, heaters and air-conditioners, most people don’t buy hay until they need it.
This is often from February onwards as people start thinking about Autumn and Winter, generally as the days get shorter and cooler, hay sales rise. This is at a time when hay production basically stops in most agricultural regions of the country. So we see rising demand and lower supplies, hence prices tend to rise in most years.
How much hay will I need in 2020?
Obviously that depends on the season. Feed Central can look back at your records and see how much hay you have bought over the last few years.
We recommend you buy at least half of your 2020 requirements now.
Should I buy direct?
A lot of producers choose to buy direct from a local farmer. This makes some sense, but be careful!
Right now we have some new season local hay listed. Its ex-farm price is $50 per tonne dearer than what we could deliver interstate hay for. This is not uncommon; we see it very regularly. We are actively working with many buyers and sellers now to put together contracts for 12 month delivery terms. This is our core business; it is what we excel at. We have hundreds of suppliers spread geographically from one end of the country to the other and from coast to coast. We can source the best value hay and the best quality. We have extremely efficient freight networks and can arrange to have it stored and looked after until you need it. We even stocktake it and inspect it, just to be sure.
I need a lot of hay; how do I get the best outcome?
Right now we are seeing a lot of feedlots, large dairies and corporate clients who need to buy a lot of hay; and are speaking to a lot of growers and traders and asking them for bids, quotes etc.
They do this with grain, so they think it will work with hay. Not bad logic. But the reality is that the hay market does not work that way. What we are seeing right now is a large number of traders, including truckie traders, grain traders and others all bidding on the same parcel of product for the same end user. This clearly sends false signals to the market. Feed Central continues to work closely, and in some cases exclusively, with a handful of buyers through our Feed Alliance Service. We see these clients get exceptional results. In many cases it saves them hundreds of thousands of dollars annually.
If I buy now, when do I have to pay for it?
We negotiate this with buyer and seller at the time of doing the contract.
In some instances, we will ask for a small deposit now and the rest at the time of or after delivery. These details are all explicitly stated in the contract so there is no misunderstanding.
If I buy now, when do you deliver it?
That is also negotiable.
Most of our best growers want to make the hay and get it into their shed and then deliver it when you need it. We can regularly put in place delivery schedules up to a year in advance. We put all of this into the contract so there is no misunderstanding.

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