In many parts of the world, grain merchandisers have just begun taking in a huge harvest. Dealing with logistics, limited space, slower than normal harvest selling by producers, and low prices have led to what appears to be a high stress situation. Focusing on how I can get through today is on the forefront of their minds.
Thinking ahead is something that many grain merchandising managers are very good at, but many struggle to get their focus any farther out than the next two or three months. Unfortunately, this can lead to some even higher stress situations that can have long lasting implications. In times like these, we need to have our focus well out into the future so that we can avoid these circumstances that lead to problems.
It appears that going into the transition in the summer of 2015 we could have a very difficult situation developing in many areas of the country. It appears that once harvest is over, the farmer bins are going to be closed up tight. Cash flow for many producers is not an issue as many are ok for now. We are already hearing predictions of the largest carryout in recent history with much of the crop yet to be sold. The longer the producer delays moving corn off the farm, the bigger the logistical problem.
For example, it’s January 1 and you have 800,000 bushels in your elevator and would normally buy another 1.6 million or 200,000 bushel per month between now and September 1. That’s eight months to move 2.4 million bushels of grain, or 300,000 bushels per month. For most, this would cause no problem, but what if that grain flow doesn’t happen this way?
That 200,000 bushel per month off the farm turns into 50,000 per month from January through June. That will leave 1.3 million bushels to come off the farm by the end of August, or 650,000 bushel per month for July and August! “Houston, we have a problem!”
This has both logistical and basis implications for the merchandiser. If in fact this scenario is a possibility, then thinking about getting sales on the books for the transition must be given serious consideration.
It’s never too soon to start thinking about the transition!
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Topics: Grain Merchandising