5 Ways Basis Trading Grain Elevators Own Their Markets

At White Commercial, we have the privilege of working with over 250 grain elevator companies all over the US and Canada. We have identified specific characteristics of companies that truly own their markets. 

By owning their market, we mean that they continue to increase their sphere of influence with producers by providing meaningful grain origination products that create win-win situations year after year.  They have also created valuable relationships with their buyers. They are the first choice when buyers need grain and are aware of their needs year around.

Being able to create these relationships with farmers and buyers takes very specific skills – Grain Merchandising skills. Through continued grain trading education and experience these companies have employees who are knowledgeable in the following areas:

1. They know grain values in their trade area and beyond. They are willing to trade markets outside of their immediate trade area when appropriate. Regardless of whether or not they trade in other markets, they are constantly aware of them and understand what affect it has on their market.
2. They know what the market is telling them out into the future and how to manage it. They are aware of market structure and the affect spreads have on their basis trading decisions.
3. They work their backstop. They effectively use their in house positions to confidently sell healthy volumes at high basis numbers for deferred shipment.  With this backstop, they can always deliver on their sale, but hopefully when basis drops, they can go buy the sale in and then go out and sell the backstop again.
4. They negotiate terms effectively. A sharp grain merchant negotiates all points of a contract before saying, “sold.” Having the best bid can get grain bought, but so can having the best discount schedule. This attention to detail can go a long way to helping both the end user and the producer.
5. Know how to really help their producers.  They are successful grain originators. Their farmers understand the superior value they provide. Farmers view them not as a middle man taking a cut (which they are not), but as their access point to the best markets available. They provide superior service, terms, delivery flexibility, etc.