Guest post by Richard Wildman
One of the decisions I face is “Where should I sell my crops?”. “When should I sell my crops?” is an even more complex question, but that’s for another blog post.
At this time our crops go in two main directions. Our corn at the home farm where we live and the alfalfa all go to the dairy next door on a contract for feed. The other part of our crop is corn and beans that are grown on a farm about 10 miles from home and then stored at the main farm and sold as grain for cash.
We are fortunate in that we have four major markets for our corn. They include many corporations including our local co-op, Trupointe, about four miles away. It has railroad access and most of the corn they buy goes on a train to the southeast part of the United States to feed pigs and chickens. The Southeast does not raise enough corn to feed their own livestock.
We have a Valero ethanol plant in Bloomingburg, a little over 20 miles from home. Technically, corn is sold and delivered to Cargill right next door, but then Cargill sends it to the ethanol plant by conveyor. The corn is made into ethanol and then the dry portion left over is made into various kinds of feeds.
We have a corn processing plant in Dayton that is also owned by Cargill. They make corn syrup that you’ll find in your pop, candy and many other food products. The byproduct is corn gluten feed that is made into livestock feed. They are just over 30 miles from home.
Another major market is at the Ohio River about 80 miles from the farm. There are several buyers on the river including Cargill and Consolidated Grain & Barge. Most of the grain on the river is put in a barge and then sent to New Orleans for export anywhere in the world.
The soybean market is very similar. It includes the local co-op that loads beans onto a train that heads to the southeast. There is a Cargill processor in Sidney, Ohio, that makes soybean oil that goes into cooking oil, salad dressing, and many other products with the byproduct soybean meal that goes into livestock feed. The same buyers that take corn at the Ohio River also load barges full of beans for export to all over the world.
Basically, when I am ready to sell corn or soybeans because I need space in the grain bins for the next year’s crop, or I am concerned that the corn may spoil and not keep well, I will check with the various crop buyers to learn their price. Then I calculate how much it costs to haul each semi load of grain to that market and determine which market will net me most profit.
The fascinating thing is the factors that create the tug of war as to what market will have the best net bid on a given day. The Cargill corn and bean processors tend to be a pretty good market because they are like a factory and need to keep the factory going whether there is a good crop or bad crop or whether it’s a holiday or weekend. Because there is a pretty consistent demand for soft drinks, candy bars, salad dressing and other food products, the processors have to constantly buy grain so they can keep the “factory” going. They have some on-site storage so they will usually buy ahead during harvest and other times for their needs but, in general, they cannot go months without buying grain if they are going to keep producing their food products.
The ethanol plant can also be pretty competitive when they are operating because they are a factory also. However, there was a time in the past year that it was not profitable to manufacture ethanol so they closed for several months shutting that market possibility down.
Trupointe tends to keep their prices just a little less than the other markets because the trucking cost is less. A lot of smaller farms that deliver in grain wagons or small trucks automatically go there because that is as far as it is safe or practical to drive. Most larger farms like ours haul in semi’s and can go as far as the price differential makes sense to cover the cost of trucking. The time that Trupointe gets really desperate for grain is if they have a train scheduled to come in and they don’t have enough grain to fill the train. I believe they book some trains months in advance and if they guess wrong on when harvest will happen or how big the harvest will be, they can come up short on filling a train. When the train arrives on their doorstep they only have so many hours to fill it or they have to pay extra fees.
Sometimes I feel bad for those managing a co-op that loads on the railroad because it can be a major headache. When we fly commercial, our daughter, who is a pilot, can watch on a website and know all over the world whether we are ahead of schedule, behind schedule or that we’ve landed. But, at least in the past, the railroad company hasn’t been able to tell our local co-op anything more than that their train has left Columbus, Ohio (about 40 miles away). The railroad seems to have no idea where it is or when it will be there. The only sure thing is that when it gets there they better get it loaded in a certain amount of hours or pay a hefty fine.
The real wild card in the markets is the Ohio River buyers. If exports are going strong and the water level is good, the Ohio River buyers can be a real competitive market. If exports are poor, then the River is pretty much out of the market – their bids won’t be enough to justify the trucking.
Last winter we sold a lot of our soybeans to the Ohio River buyers because the upper Mississippi River had a low water level because of the drought. There were restrictions on how many bushels they could load on a barge. That meant that beans that were contracted to be shipped from New Orleans needed to come from points on the Ohio River because the water flow was still good. A few years ago we had a time when the Ohio River was so high it actually flooded the buyers on the river. They were just concerned that their flooded buildings and barges that were tied off didn’t float away, so there was no good market on the river for a few weeks until the water level receded.
Even though a lot of things can be going on behind the scenes to create the relative price structure on any given day, the ultimate decision is usually pretty easy by looking at bids from several buyers, subtracting the cost for trucking, and comparing my net price from each buyer to see where it makes the most sense to sell that day.