5 Guidelines for Great Grain Contract Offerings

With so many different types of marketing alternatives available to farmers in the marketplace, how do you, at the grain elevator, decide on which ones to offer?  We believe that if you stick to the following guidelines, then you’ll be sure to have properly aligned your interests with that of your farmer customers.

 #1:  Offer a few good contracts

Offering too many different types of contracts can be counterproductive, because it will make it harder for farmers to reach a decision about how they want to sell.  The best approach is to offer a few sound contracts that best suit your customers concerns and needs.

#2:  Simple is better              

Offer contracts that are clear and easy to understand.  Stay away from those that are complicated or deal with a lot of futures and options terminology.  You will appeal to a broader base of customers and avoid potential misunderstanding if you keep your contracts simple.

#3:  Follow legal guidelines

A grain contract must meet these criteria to be within legal requirements.  Adhere strictly to these provisions when writing contracts:

• The contracts must mandate a specific quantity for delivery.
• The contract must mandate a specific delivery period.
• The contract must mandate a specific price or specific method for establishing a final price.
• The contract may not allow more grain to be sold that can realistically be delivered.

#4:  Avoid unnecessary risk

Some contracts have risks that are not easily identified.  Be sure to examine all contracts closely for hidden risks.  Most importantly, make sure that both of you and the customer are aware of any and all risks involved before entering into any contract.

#5:  Create a win/win environment

Offer contracts that are in the best interest of all parties involved.  Contracts that only benefit the producer, or contracts that only benefit the elevator, are detrimental to both parties in the long run.  The best marketing alternatives are those that enable both parties to be successful – those that give the producer the opportunity to sell grain profitably and the elevator the opportunity to merchandise profitably.

Sometimes a producer may request a marketing alternative that you know is not in his best interest.  Rather than doing it for him, the best course of action is to explain why you do not offer the contract and show him the benefits of other alternatives.  Keeping with the marketing services you know to be right will build customer confidence and loyalty in the long run.

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