Grain Marketing

1
Grain Marketing

• Storage and Transportation

Chapters 7
2
Common Profit Centers for Grain Elevators

• Grain Drying and Storage
• Grain Quality Blending
• Grain Trading
• Freight Trading
• Input Supply Sales and Service (feed, seed,
  fertilizer, and chemicals)
• Market Advisory Services
• Other

3
Grain Warehouse Regulations

• State license is mandatory
• Ohio Department of Agriculture
• Federal license is voluntary
• US Grain Warehouse Act
• Requirements include
• Suitable Warehouse
• Good business reputation
• Current financial reports
• Minimum net worth (10,000)
• Suitable bond requirements based on net worth
  and storage capacity

4
Types of Grain Stocks

• Pipeline stocks
• Stocks in the pipeline of the agribusiness
  marketing system from the producer to consumer
• Speculative stocks
• Stocks held to balance supply and demand through
  the marketing year and carryover from year to
  year.

5
Grain Storage

• Grain a living, breathing organism that can be
  damaged quickly without proper care
• Proper care requires
• Good facilities
• Adequate aeration
• Moisture level control
• Temperature control

6
GRAIN STORAGE

• STORAGE CAPACITY HAS INCREASED DUE TO
• INCREASED GRAIN PRODUCTION
• LARGER, MORE SPECIALIZED FARMS
• SHORTER, FASTER HARVESTING PERIOD
• INCREASED PROCESSOR DEMANDS
• GOVERNMENT PROGRAMS TO FINANCE STORAGE
• COST OF STORAGE
• FIXED COSTS DEPRECIATION, MAINTENANCE, INTEREST
  ON CAPITAL INVESTMENT, INSURANCE ON FACILITY AND
  PROPERTY TAXES
• VARIABLE COSTS INTEREST ON STORED GRAIN,
  SHRINKAGE, INSURANCE ON GRAIN, LABOR AND
  HANDLING, QUALITY MAINTENANCE COSTS

7
SELECTED STATES OFF-FARM ON-FARMGRAIN STORAGE
CAPACITY DECEMBER 1, 2001 - 2002
8
Top US Grain HandlersSeptember, 2002
9
Top US Grain Handlers

10
Top US Grain Firms
All statistics exclude joint venture facilities,
except the ADM numbers, which include the
ADM/Farmland joint ventu
11
Major Economic Forces Affecting the
Grain Industryin Recent Years1. Excess
capacity and thin operating margins.2.
Structural changes stimulated by transportation
de-regulation and unit train rail rates.3.
Mergers, acquisitions, and plant closures
hastened by excess capacity.4. More joint
ventures in grain merchandising, exporting and
processing.5. Vertical integration in the grain
system. 1. More investments in value
added grain processing. 2.
Integration of grain merchandising,
exporting, and grain processing.
12
Advantages and Disadvantages of Transportation
Modes
13
COST-DISTRANCE RELATIONSHIPS FOR
GRAINTRANSPORTATION BY RAIL AND TRUCK
14

• GRAIN TRANSPORTATION ISSUES
• SLOWDOWN IN RAIL LINE ABANDONMENT
• EXCESS CAPACITY IN TRANSPORTATION SYSTEM
• RAILROAD REORGANIZATION ACT (STAGGERS ACT)
• AN ACT TO DE-REGULATE RAILROADS (ICC ROLE
  REDUCED)
• MARKET PRICING OF SERVICES
• RAILROAD MERGERS CONSOLIDATION
• EASIER ENTRY CONDITIONS
• MORE SHORTLINE RAILROADS
• TRUCK TRANSPORTATION
• MORE UNIFORM ROAD RESTRICTIONS
• MORE TWO WAY HAULS
• EASIER ENTRY CONDITIONS
• USER FEES

15

• GRAIN TRANSPORTATION ISSUES
• WATER TRANSPORTATION
• TOO MANY BARGES
• LOCK AND DAM CONSTRAINTS
• USER FEES
• POOR CONDITION OF RURAL ROADS AND HIGHWAYS
• INCREASING SIZE OF FARMS AGRIBUSINESSES

16

• U.S. Grain Ports
• Inland Waterways

17
Basis and Freight RatesFinding the Best Market
for Grain

• From Iowa to
• PNW bid 52
• Freight 43
• SE bid 65
• Freight 62
• NO bid 31
• Freight 20
• Which is best?

• From Ohio to
• PNW bid 52
• Freight 47
• SE bid 65
• Freight 45
• NO bid 31
• Freight 13
• Which is best?