5 Things Grain Buyers May Not Tell A Grain Merchandiser

The reason behind some buyers not volunteering this information to the elevator grain merchandiser isn’t necessarily deceitful; rather, it can be just a matter of the buyer himself not possessing a firm grasp on these issues. Although this seems to be more prevalent when dealing with “wet behind the ears” grain purchasers, it is possible that even someone who has been originating grain for decades doesn’t know all the nuances of our business.

1)      EVERYTHING IS NEGOTIABLE

Until you say “sold”, anything and everything can be hashed out on a grain contract. Of course, points such as volume and delivery location/timeframe are typically discussed, but don’t forget items such as discount schedules to apply, contract cancellation terms (if needed), the option to turn a FOB contract into a delivered contract, and late pickup fees on FOB contracts if the buyer fails to perform as agreed upon. Selling basis several months out in advance? Negotiate the option to price out the contract prior to delivery, which may be worth giving back a little on the basis. Ask to exchange below the market if positive equity in your futures account will help you weather a summertime rally. You’ll never know if you never ask.

2)      WE WILL TRY TO STEAL THE SPREAD

This is something that all buyers usually do, probably even you. Do you forward contract July delivered wheat versus the WN, or September delivered corn versus the CU? If so, then you are “stealing the spread”. To mitigate this from happening to your merchandising program, look to structure forward sales that will bridge this gap, such as selling harvest time soybeans for O/N/D versus the SF instead of just O/N versus the SX, or offering F/M/A/M corn versus the CK instead of J/F/M versus the CH.  By tweaking your typical selling timeframes just a bit, you can capture this spread and get the buyer the coverage she is looking for.

3)      WE PROBABLY DON’T KNOW THE LOCAL MARKET AS WELL AS YOU DO

Many times, the buyers you will deal with on a regular basis have a tough time finding you on a map, let alone having ever actually been driving around in your trade area. This is where you can become a valuable asset to them. You know your producers better than anyone else; how much they plant, when they sell and how much they have to sell. You can be the vital link to connect your local area’s grain with the demands of the market, fulfilling the needs of both farmer and end user.

4)      OUR MAIN PRIORITY IN LIFE IS NOT GETTING YOUR GRAIN DUMPED QUICKLY

Do you sell to a feed mill? They are in the business of keeping animals from starving. Do you sell to an ethanol plant? They are in the business of keeping vehicles running down the road. Do you sell to a flour mill? They are in the business of keeping bakers from running out of bread. More often than not, the timely dumping of grain trucks takes a backseat to the core purpose of the buyer’s company. It is up to you to know the ins and outs of the user you’re selling to. You don’t want to let an over-zealous buyer cause you any potential harvest time logistics problems because he overbooked grain for that particular time slot when you are trying to keep your doors open to service your producers. 

5)      OUR UNDERSTANDING OF GRAIN MERCHANDISING MAY NOT BE AS DEEP AS YOU THINK

You will, or have, encountered fresh faced originators, full of enthusiasm and eager to acquire grain. It’s likely that these first time buyers have only been through a cursory, in-house grain origination program that may be so limited in scope that a working knowledge of hedging mechanics may be lacking. This can extend even to those “veterans” of your local market, so don’t ever assume that time-in equates to knowledge-of. These buyers may end up learning more in a twenty minute conversation with you than a month working in their trading office. Be patient and offer help to these folks if asked, build the relationship and strive towards that WIN-WIN scenario that makes your business successful.

To learn more about understanding and servicing all types of buyers in a way that is mutually beneficial, sign up below for our new Direct Ship course coming this fall.