UNUSUALLY high and low canola oil levels in crops across different parts of the country have brought oil increment payments into the spotlight.
In Victoria and South Australia, where the canola season was particularly favourable in earlier production zones, such as the Upper South East in SA and the Wimmera in Victoria, there have been isolated reports of oil over 50 per cent.
The converse is true in central NSW and the northern Riverina, where a dry season has meant lower than average oil levels.
The industry benchmark for oil levels is 42pc, with increments paid above and below this figure.
The usual pricing is 1.5pc of the total cash price for every per cent above or below the 42pc benchmark.
With current levels at around $400 a tonne, those with oil levels of 50pc could earn close to $50/t in increments.
However some marketers are no longer paying increments, or have capped payments at 45pc – the reasoning being that they are only getting the stack average and by paying increments, they may be paying above the odds.
Grain Trade Australia chairman Tom Keene said it was a classic example of the highest price not necessarily being the best price.
“You have to be aware of all the aspects of a contract before signing it – have a look and check whether there are increments paid or not – whatever is stipulated in the contract.”
“At GTA we are just advocating a common sense approach – go through your contract carefully, whatever the commodity, and calculate your net payments, see which option works out best for you.”
“Prices are expressed in different forms, and you have to assess how they will work in your specific case.”
He suggested tools such as warehousing as a way to create a cooling off period before making a decision.
Mr Keene stressed that marketers were not attempting to deceive growers with their contracts, but said there was now a wide range of marketing options available because of the different needs of growers in various regions.
Southern Quality Produce (SQP) managing director Ben Fleay said his company was still paying increments, but said there was a difficulty in buying it out of the bulk system where they only received the stack average.
“Obviously, if a grower has got a quality product, they want to go out and market it as such and get the increments, but we can’t necessarily pass this on to our customers.
“There can be some really big gains for the growers, so its something they need to look out on with their contracts – and the opposite is true, those with lower oil levels are probably better off looking for non-increment based contracts.
“We tend to think that to attract the canola you probably still need to pay increments – and we hope it works out as swings and roundabouts with the increments we pay and the quality of the physical canola we get.”
South Australian Research and Development Institute (SARDI) research scientists and oilseeds co-ordinator Trent Potter said he had visited several receival sites in the past few weeks and had heard of test results up to 49pc, while there had been anecdotal reports of some samples of over 50pc, although he said these had not been done officially.
He said areas where canola crops were finished before the November heatwave, such as the Upper South East and the Wimmera had fared the best on the oil front.
Mr Potter was unsure whether heat would impact on the later lower South East and Western District crops.
“The crops are just starting to come in now in the Western District, while around Millicent, they are just due to be windrowed this week.”
GrainCorp corporate affairs manager David Ginns said oil levels in the very high 40s had been processed at the company’s Murtoa site in the Wimmera, but nothing had officially been recorded over 50pc.
Mr Fleay said he was generally hearing of Western District canola crops of 2t/ha to 2.5t/ha, slightly below the region’s top years, but a strong result.
“It's in the early stages, but so far, it seems to have come through the heat and rain in November fairly well.”
