Has your farmer ever asked you a question similar to this:
I need to get some corn sold, and the price at the elevator is the highest it’s been in the past couple of months–can you call and make a cash sale for 20,000 bushels?
What was your reaction? Depending on whether you’ve been asked this question before or not, your reaction probably fell into one of these categories:
- “Moment of Apprehension”: What does he want me to do? What am I going to be asked when I call?
- “This isn’t my First Rodeo”: Ok, I’ll give them a call…followed by a series of questions to get the information you know you’ll be asked when you make the sale.
If you’re in the “Moment of Apprehension” club, then this article is just what you need to feel comfortable and prepared when contracting grain with the buyer.
The following 4 items are the bits of information you’ll need to capture from your farmer:
- Account Name: What is the account name you deliver grain under? Some operations have a business name they contract under, and others simply use their first and last name. If you’re not sure, this can usually be found listed at the top of your previous contracts. Also, will this 20,000 bushels be split with anyone? For instance, if you farm with your in-laws, is this 20,000 bushels a sale for just you, or is it a split between you & your in-laws? If it’s a split, be sure to know what the percentage is (50/50, 60/40, etc.). Under a split situation, most grain buyers will have to make two contracts, one for each party in the split, so it’s important information to tell them up front.
- Delivery Time Frame: Will these bushels be delivered this month, next month, harvest?? Or, maybe your farmer needs to haul grain within the next 3 months and wants the best cash bid posted within that range with no preference on the specific delivery window. This would be a good time to check the grain buyer’s bid sheet online to see what delivery windows they’re posting bids for. For instance, let’s say there’s a bid posted with delivery from May 1st – 31st and one for June 1st – 30th. In that case, you can’t contract for delivery from May 15th – June 15th because that time frame overlaps two different bids. The buyer will likely make you choose either May or June to stick with the what is posted on the bid sheet.
- Contract Type & PRICE: Is this a cash, basis, futures, or non traditional contract? In the original question we started with, he mentioned wanting to make a cash sale, but it never hurts to clarify. Also, be sure to ask your farmer if he’s willing to sell at a different price in case it’s changed since the last time he heard/saw it. For instance, he may have heard on the radio that the cash price is $3.50, but that was 12:00pm when the market was still open and fluctuating. There’s a good chance the price may change by the time you call and sell. If you know the range of prices he’s willing to accept, you’ll save yourself some potential headache when you’re on the phone.
- Quantity: This piece of information, 20,000 bushels, was provided in the initial question. However, if he wouldn’t have provided the bushel quantity, it’s a key component to make sure you have in order to make the sale.
Once you gather the information above, you’re ready to call and contract with the elevator! If you’re still apprehensive about how the conversation with the grain buyer might go, here’s an example:
Grain buyer: Oh sure, you need to sell some grain today. Let me pull up a contract–who’s it for & is it split?
You: It’s for Farm Girl Farms, no splits.
Grain buyer: Great, how many bushels?
You: 20,000 bu
Grain buyer: What kind of contract would you like to do today?
You: This will be a cash sale for harvest delivery in October. Is your cash price for October still $3.50?
Grain buyer: Delivery in October–sounds good. Actually, our cash price is now $3.48. The market just closed a couple pennies down…are you still ok with $3.48 or would you rather put in an offer to sell at $3.50 and wait to see if your offer hits?
You: No need to put in an offer for $3.50, I’ll contract at $3.48.
Grain buyer: Great–the contract is in for Farm Girl Farms at $3.48 cash on 20,000 bushels delivered this October. You should see the contract in the mail to sign and send back in the next few days. Thanks for calling–give me a call if you have any questions!
Seems easy enough, right? That’s because it really is that simple! Once you have the information you need, the conversation will go smoothly.