Why Paying More for Grain Won’t Help Your Grain Origination

Anyone who has ever bought grain knows how tempting it is to raise their bid just a little bit. It seems like your bid for grain is never quite enough when you are talking with your farmer customers. Someone else somewhere else always seems to have a better bid than you. Never mind the fact that they are 100 miles away and only 3 cents better. Never mind the fact that they have a 4 hour waiting time and you have no line and can dump a truck in 5 minutes.

So eventually it wears on you and no matter how much you argue your case, you just give in and raise your bid. You tell yourself it will help you attract some of those bushels from the fringes of your territory that you don’t normally get. You tell yourself you can make up the difference merchandising. You tell yourself that at least if nothing else, you won’t have to have these arguments with your customers about your bid being too low.

So does it work?

Not like you thought it would.

Do your customers stop complaining about the competition’s bid? Maybe for a day or so until the competition raises their bid, too. The competition has the same struggle you have with people complaining to them when other folks have a better bid. So, they cave to the pressure just like you did.

Do you get those fringe bushels you don’t normally get? Not really. There’s a reason those guys already go somewhere else. It’s probably easier for them or there’s a relationship or something else. They want to keep doing what they are doing. When you raise your bid, all they do is go to their normal grain elevator and tell them what you are doing and demand that they match it or beat it. Your competition wants to take care of their loyal customer, so they do and you still miss the bushels.

Do you “make up the difference merchandising?” Actually, it’s just the opposite. Since the fringe guys just used your bid to get a better bid elsewhere, everyone in the market just ends up paying more and cutting the merchandising margins. You end up paying more for bushels you would have gotten anyways from your loyal customers. Essentially, raising your bid caused every grain handler in your market to cut their margins, the farmers all took home a little extra, and the bushels all went to the same place they would’ve gone anyways.

So if a higher bid won’t help get more bushels, what will? In a word: Service. The secret to great grain origination is taking care of your customers. That includes a multitude of things: grateful service, responsible pricing flexibility, good farm marketing help, investing in the capital it takes to unload faster, being open when no one else is open, etc.

The bottom line: you should pay less sometimes, but you have to be worth it!

For more creative ways others around the country have made themselves worth it, be sure to check out our Grain Origination Course below.