Dear Farmer

Welcome to the first Grain Co-Production Update for 2011.

GRAIN CO-PRODUCTION UPDATE - Issue 11

2010 SEASON HARVEST PROGRESS UPDATE

The 2010 harvest has been a challenging one for all growers and AACL. Harvest for contracted farmers in Western Australia (WA) is now complete with just a few growers to deliver remaining tonnage into the CBH system. Production was slightly down on pre-harvest yield estimates due to the very dry finish experienced across WA which affected actual yields to a greater extent than was anticipated.

Harvest of contracted area in the Eastern States is approximately 90% complete with rainfall prior to and during harvest causing significant delays. Quality of the grain delivered was also impacted by the rain, with limited tonnage of premium grades being received. Yields on completed contracts have been in line with pre-harvest yield estimates except where paddocks were badly inundated with flood waters. Weather permitting, AACL estimates that the 2010 season harvest will be completed in the Eastern States by the end of February.

2011 GRAIN CO-PRODUCTION OFFER DETAILS

AACL is now generating payment offers for 2011.

Capital for 2011 is guaranteed via the 3 year funding and marketing agreement executed with Glencore Grain Pty Ltd (Glencore Grain) on 25 October 2011 together with existing retail funds. This capital is currently limited to $57 million for 2011.

Please speak with your Regional Area Manager (RAM) to discuss the relevant paperwork required.

Please note, all farmer applications that proceed to receiving a signed Option Agreement will then be subject to financial and agronomic due diligence before a GCP contract is executed.

AACL has modified the GCP product structure for 2011 contracts to provide a better balance of risk to investors and address feedback on cost concerns for farmers. For further details regarding an application or the revised product structure, please contact your RAM.

GRAIN MARKETING - 2010 SEASON PROJECT UPDATE

Market Update

The grain and oilseed markets continue to be volatile with the respective futures markets rallying significantly over the past few weeks. There has been two main factors contributing to this rally. Firstly, there are concerns over the Northern Hemisphere winter wheat crop currently in the ground. Secondly, tight carry out of the two main US spring crops (corn and soybeans) means there is currently a ‘battle for acres’ for each of these commodities in the lead up to sowing. The US spring crop will be sown from mid April and whilst uncertainty surrounds the breakdown of corn and soybean acres, the ‘battle for acres’ will continue.

Although futures markets have rallied, domestic cash prices have failed to match this one for one due in part to the strong Australian dollar.

Harvest Payments

Many farmers have completed harvest of AACL contracted paddocks and have been paid their Harvest Payment and any applicable bonus payment. However, a significant number of farmers are yet to complete harvest and deliver the grain produced from their AACL contracted area.

Farmers are reminded to promptly advise AACL once the harvest of all AACL contracted paddocks are completed. AACL will then issue a Harvest Declaration Form and Final Delivery Summary when all loads have been correctly allocated to their nominated paddocks.

The Harvest Payment and Farmer Bonus - Harvest payments, where applicable, will be paid 30 days after receipt of the correctly completed Harvest Declaration Form.

To determine if there is a Farmer Bonus - Harvest applicable, the Net Delivered Value for grain produced from AACL contracted areas will be calculated using the nominated estimates of price and costs published on 1 November 2010. 

• Click here to view the 2010 Nominated Estimated Pool Returns including FOB and finance costs.
• Click here to view the 2010 Receival Sites and Freight Rates. AACL contracted grain can only be delivered to these approved sites.

The headline prices are as below.

AACL Nominated GCP Grain Price Estimates - FOB

                                    WA     SA      VIC     NSW
Wheat - APW           320    310     310     310
Barley - Feed            280    271     271     271
Canola - Non GM      550    530     520     520

It is the Farmer Distribution % of the calculated Net Delivered Value that is then compared against the contracted Target Value to determine if there is a Farmer Bonus - Harvest payable.

AACL will be utilising a Farmer Distribution % of 70%. This means that 70% of the estimated Net Delivered Value is available for comparison against the contracted Target Value.

AACL will provide an updated pool estimate which will be used for future distributions by 28 February 2011. Until all grain produced from the AACL contracted area is known, for both quality and quantity, no updates to the AACL GCP Grain Price Estimates can be made.

AACL aims to make distributions on 25 April, 25 July and 25 October. On these distribution dates, AACL may be able to increase the amount distributed to farmers from the 70% made at harvest. It is also AACL’s intention to finalise the pool by 25 July, however this will be dependent on market conditions.

VISIT OUR NEW WEBSITE

AACL has recently launched a new website to provide a greater range of information and provide more user friendly navigation for all of our stakeholders. Visit our new website at www.aacl.com.au. As always, we welcome your feedback to info@aacl.com.au.

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

Yours sincerely

SIMON FOLEY
General Manager - Product Services