BREAKING RECORDS a new dawn in grain

In a year when the Australian grain industry is breaking records, the independent grain exchange continues to gather pace.

Clear Grain Exchange (CGX) had another record day of trade volume on Monday 14th February with 102,253 tonnes of Australian grain trading worth A$38 million. This smashed the previous record of 74,291 tonnes set just 10 days earlier.

Managing director of CGX Nathan Cattle, says it’s an exciting time for the exchange as the company approaches a major release scheduled to significantly advance their technology.

‘We appreciate the support from the grain industry and believe our users are creating value that would otherwise go unrealised.’

'It's evident in the price of grains trading on the exchange often being stronger than prices published in the market through traditional channels such as cash boards and advertised contract prices.'

Nathan believes the value is being generated by CGX’s independence and knowledge borne from years’ operating under the ownership of New Zealand’s stock exchange (NZX Ltd).

‘There are core values and learnings around what’s required to operate an electronic exchange that can meaningfully improve market efficiencies and in doing so, the economics for all parties.’

‘CGX is a pure exchange. We’re not a buyer, seller or advisor of grain. Providing a secure exchange that promotes a more efficient market is all we do.’

‘That’s why it works so effectively because there are no inherent conflicts or compromises made. We just focus on operating best practice to ensure all buyers, sellers and agents can participate and achieve the real price for grain.’

If you look at the evidence, it’s very clear (excuse the pun). CGX’s growth metrics are impressive.

The number of grower businesses registered on the exchange is now over 20,000. Just over 100 grower agent or consulting businesses are registered, and more than 300 grain buyers.

More importantly however, the registrations appear to be actively using the exchange. In 2021, 4,294 growers and 36 agent businesses sold grain through the exchange. 87 different buyers bought grain.

Businesses are registering accounts and starting to use the exchange more and more. New users often use the exchange for price discovery while continuing to sell or buy via their traditional channels’ Nathan explains.

‘Once they feel more comfortable and understand how to get value from using the exchange, they start to offer their grain for sale and realise how easy it is.’

‘All a grower needs to worry about is what price they want for their grain. All a buyer needs to worry about is what price they will pay for grain.’

‘There is no ringing around trying to find a buyer and negotiate price, and buyers can more easily find grain for sale.’

‘That’s a win, win scenario that generates better prices’ Nathan says.

Growers also appear to like how setting a sale price on the exchange can take the emotion out of the decision.

‘Selling grain can be emotional. It’s a grower’s livelihood. That can often lead to some second guessing, should I sell today or maybe wait for a bit. The burden of that daily decision can be excruciating and often results in growers missing opportunities all together.’

‘Often grain will trade on the exchange $10-15/t above the best published bid on the day. So, if a grower or their agent was waiting for a published bid to get up to that price before deciding to sell, and then try to negotiate the market, they often miss the sale.’

‘Having it out on the open exchange ensures it’s there to be sold. All buyers can see it and try to buy it. Growers just need to worry about what price they want. If they are unsure, they can simply offer it at a higher price and edit it in the future if needed.’

The secure settlement and clearing services CGX provide also create significant efficiency gains and protection from counterparty risk. It allows parties to be anonymous when using the exchange.

Nathan believes this is critical to ensure no underlying bias and to promote market efficiency.

‘Sellers and buyers need to feel safe so they can put their price out there, no matter how silly it may seem on the day. Prices move and who’s to say what levels will be trading in the future? That’s up to the user.’

For those that don’t know, CGX operate a secure settlement process that ensures growers retain title of grain until they’re paid, with payment occurring within 7 business days. The average time it takes for settlement has been just 4.5 days.

Nathan points out that this service has been a growing business in itself.

‘Parties to a grain transaction are seeing benefits in utilising our settlement services to improve security of the transaction, but also make use of the digitised back-office functions such as paying levies, end point royalties and ensuring best practice in managing bank account details.’

To support the growth, CGX has undertaken an extensive investment plan into its technology which Nathan says will be released during the last weekend of February.

‘There’s been a lot of work and planning behind the scenes to build the business. We have an amazing team that’s been able to execute on that and we’re excited to push into the next phase of our journey.’

‘The release of our upgraded technology stack is exciting for us as it enables us to push ahead and develop our products and services further.’

‘Our users will see some immediate benefits such as a more mobile friendly website, more ways to place offers and bids on the exchange, and improved invoices to name a few.’

‘We’re looking forward to share this with the Australian grain industry with more enhancements to come.’