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GRAIN pools have long been a popular selling option for busy farmers trying to cautiously hedge their bets to get a fair price in unpredictable markets, but are pool returns really such a good safety net after all?
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Despite representing hundreds of millions of dollars in agricultural investment each year, there is surprisingly little independent analysis of the way grain traders manage their pools or which operators have a proven track record of delivering better returns.
In fact, there is often a big disparity in returns paid by grain pools.
Final 2013 pool returns paid by different managers varied as much as $40 a tonne in NSW, according to benchmarking analysis by the Profarmer market advisory group.
The research included results for deliveries to pools servicing the Newcastle port zone showing the lowest performers paid $275/t for APW1 grade wheat while others achieved above $315/t for the same grade at the same port.
Six successive years of analysis by Sydney-based grain marketer Market Check have identified pool operators who are consistently big under performers and others repeatedly achieving merely average returns for growers.
"The results don't appear to have anything to do with the size of the business, said Market Check's operations and managed products general manager Alex Campbell, who is frustrated by a lack of independent benchmarking and analysis of growers' pool "investments".
"Some results are quite alarming."In actual investment terms the pool may be generating a positive return, but the aim is to deliver a better result than would have been paid if the crop was sold straight off the header at harvest.
"In some cases growers get no more than the harvest price and sometimes less."
Mr Campbell said pools, which probably held about 3 million tonnes of winter crop in an average year, should be regarded by growers as something akin to managed investment funds.
"The only real difference is that an investment of cash is made into a managed fund, while an investment of grain goes into a grain pool," he said.
However, grain pools were exempt from many of the rules required of the finance industry, including disclosure of conflicts of interest and transparency of reporting.
"I'd think it's only a fair thing to emulate what is rigorously regulated in the finance industry.
"We should have an independent method of comparing one pool provider with another, ideally using specialist accounting firms like PricewaterhouseCoopers or KPMG.
"Growers I talk to would certainly like to see greater scrutiny, but others may not realise how varied pool results can be, or how various providers operate.
"And some marketing people make good money out pools so they don't necessarily want to talk about more transparency."
"Reasonable performance is not about whether the investment has made or lost money, it's all a pool manager performing to a reasonable level against a market index given the mandate of their pool."
But while a industry-wide monitoring process could also keep unwanted government scrutiny and costs at bay Mr Campbell conceded it would be expensive project to fund, a fact confirmed by Kondinin Group's research general manager Ben White.
Kondinin monitored Western Australian export wheat pools for four years, but did not commission its independent report after last season because "the costs are massive and the work requires a lot of specialist knowledge"."The 2011, 2012 and 2013 season reports did show consistent results among pool providers and gave growers an idea of operators' track records, which was considered helpful by farmers," Mr White said.
The challenge was convincing growers and other industry groups to contribute to a fund to make pool marketing transparency an annual reality
"But while some farmers used our information to help them choose certain pool providers, they also tend to make marketing decisions based on relationships with traders.
"Like buying machinery, these decisions are influenced a lot by personal experience and support you've had over time - it's not entirely about price."
Gain Trade Australia (GTA) chief executive officer, Geoff Honey said the topic of pool performance monitoring had not been mentioned to him for more than a year which suggested it was not a glaring concern for farmers.
"If it was ever likely to have been an issue on the radar, I'd have expected a lot of discussion after we had some high profile marketing pool setbacks a few years ago," he said.
Mr Honey noted the GTA had strict best practice guidelines for pool managers to follow and farmers should also be aware of what to expect selling grain into a pool, or elsewhere.
"If you're considering pooling your crop, don't wait until harvest to find a marketer - do your homework in August or September," he said.
"You don't buy or sell a $350,000 house without getting a solicitor involved, so treat yourself to whatever expertise you can get before picking up the phone to sell $150,000 or $350,000 worth of grain."