1 Free-In-Store - How to Compare Pricing Terms

September 26, 2014

There are defined contractual sales terms that outline transactions within the
Australian Grain Industry. These terms are ex-Farm, Delivered Silo (Cash Price),
Free-In-Store, ex-Store, Delivered Container Terminal (DCT), and Free-On-Board
(FOB).

These terms communicate the tasks, costs, and risks associated with the
transportation and delivery of goods. The terms are intended to simplify the
interpretation of the rules between parties of a contract involving the movement of
goods.

The below chart outlines ex-Farm, Delivered Silo (Cash Price) and a Free-In-Store
contract terms. We have left out Ex-Store, Delivered Container Terminal (DCT), and
Free-On-Board (FOB) for clarity.
 Stages within the supply chain -
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Sellers Responsibility Road/Rail

Freight
Recieval Outloading Loading
Farm-Gate
Farm Costs to place Trucking onto Boat Shipping
to
Transaction Occurs Gate grain into from (Fobbing) costs
Warehouse
Warehouse Warehouse costs
cost
to Port costs
Buyer Responsibility

Supply
Descriptio Applicatio
chain $0 $10 $11.54 $25 $33 $50
n n
costs

Charges
When Seller is responsible for
& Risk
Selling Seller Buyer Buyer Buyer Buyer Buyer making goods available at the
Transfers
ex-Farm from on- sellers premises. The buyer
Farm bares the full risk from there
Storage on.
Price 200 210 221.54 246.54 279.54 329.54

Charges Seller is responsible for

& Risk Seller Seller Buyer Buyer Buyer Buyer delivery of goods into custody
When
Transfers of the storage provider. Risk
Delivered selling
is transferred to buyer as soon
Silo direct to a
as the grain is received by
(Cash buyer
bulk handler. Seller accepts
Price) from bulk
Price 200 210 221.54 246.54 279.54 329.54 any charges incurred by
handler
delaying the sale (ie storage
fees).

Charges Seller is responsible for

& Risks delivery of goods into
When Seller Seller Seller Buyer Buyer Buyer
Transfer storage and therefore
selling on
Free-In- s incurs fees including the
the Clear
Store recieval fee ($10) and
Grain
(FIS) shrink $1.54 (0.07%). In
Exchang
WA, the seller is also
e Price 200 210 221.54 246.54 279.54 329.54
responsible for the freight
to port.

Clear Grain Exchange uses a Free-In-Store contract. The seller provides the buyer
an asset free of any further debt from the point of transfer (or in legal terms -
conveyance). It is the seller's responsibility to bring the grain to store, have the bulk
handler receive & classify the grain and the grain be free any further debt like the
receival fee and shrink.
2 Why is Clear Free-In-Store?
Clear Grain Exchange trades Free-In-Store as it allows the Primary & Secondary
market to trade on the Clear Grain Exchange. The primary market is grower to buyer
and the secondary is buyer to buyer.

There are no hard facts or publications to quote but anecdotally, for every tonne of
wheat grain we grow in Australia, it is sold 7 times before it is delivered to an end-
user. This equates to a total market size of 150-180 million tonnes for a 25M tonne
wheat crop.

By Clear Grain Exchange trading Free-In-Store, traders can offer grain onto market
just like a grower.

For growers, this means more trades that reflect the market, more prices to really
understand changes in the market and increased opportunity with more sellers and
buyers.
For a grower that chooses to sell on the Clear Grain Exchange, it is important to
know how to convert a price through certain pricing points. When you get a text
message from Clear Grain Exchange that’s Free-In-Store, what price is that
converted to a cash price (delivered silo)? When you think of a desired price - what
is the Free-In-Store equivalent?

Clear Grain Exchange allows growers who warehouse grain at CBH, GrainCorp,
Viterra and Grainflow (SA only) to offer grain. Whilst each bulk handler charges
different rates, they all have similar commercial models.

They all have a receival fee, storage fees, out-loading fees, port recieval fees, and
elevator charges to fill a boat.

In the above example, we created a mock bulk handler with mock fees and charges
to show you how the different charges affect the price of a contract at different
pricing points.

Bulk Fobbing
Shrink and Warehouse
Outloading and Freight Costs
Farm Gate Farm Gate to Storage Recieval Charges
to Port Port Recieval Fee Shipping
Price Freight to Warehouse Recieval fee $10/t
Outloading fee $5/t $3/t Costs $50/t
$210 charges = $10/t Shrink 0.7% (or $1.54/t in dollar
Trucking to port $20/t Port Elevator
terms)
Costs $30/t

On the Clear Grain Exchange, you can set any price. When you create an offer, the
Offer Calculator makes setting your price and comparing prices really simple. Enter
& adjust your price until you get the right price.

Clear Grain Exchange calls the "Track equivalent price Indication at Dookie ST" in
this example the cash price/delivered price from the table above.

In the example above, the cash price/delivered site price is 293.05.

This is the price you can compare to a site price outside of the Clear Grain
Exchange.

3 Track Price Example

Are you more familiar with cash prices represented at the port level (known as port
track prices)?

It's easy to convert port track prices to a Free-In-Store site price. Here is an example
using similar prices from the above example.

Step 1 - Convert the Port Track Price to shrunk tonnes

Track Site Price (Unshrunk): $315.57

$315.57
Factor in Shrink (0.7%): = $317.80
0.993

Step 2 - Convert the Port Price to a Site Price and then factor-in the BHC recieval
fee.

Price Point Location Price Changes

Track Port Price (shrunk tonnes) Melbourne $317.80 -

Deduct the location differential Dookie $293.05 $24.75

Add the receival fee Dookie $300.00 $6.95

If you want to discuss any of this content then you can call the team at the Clear
Grain Exchange on 1800 000 410.

Profarmer Price Discovery App is a great tool to help you price your grain Free-In-
Store.

Profarmer provides us the best Free-In-Store indicative price that they include in
their Price Discovery app that we make available in your Clear account. You can find
the best Profarmer Indicative Price when you create an offer (unless there is a better
bid on Clear Grain Exchange or a relevant trade that we can use to help you set your
price).
Other Resources:
Grain Trade Australia
Profarmer Price Discovery Website
Profarmer Price Discovery iPhone in the iTunes App Store

To obtain the commercial rates & policies like shrink rates from each bulk handler,
visit their website.

Read more on setting your price on the Clear Grain Exchange