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Senior Advisor

Why the need for price later?

Our co-op has offered price later conracts in January of this year, Check with your local facility to determine room before delivery.

 

Current prices respectable with tight basis  but they have to give incentives to get control of physical needs.

 

Could it be that they are the supplier for a monstrously hungry ethanol plant and a potentially strong bull market on the horizon? They must feel like farmers paying outrageous fertilizer prices and expecting it to be higher tomorrow.

 

HUMM Farmers, Maybe we ought to encourage price later fertilizer delivery. We could pay them whenever they want at what we are bidding at the time. Makes sense to me.

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8 Replies
Senior Contributor

Re: Why the need for price later?

Don, I guess I like price later because it gives us a chance to haul our own product at our leisure(winter time with good roads) when I know the product will be sold to that coop before next harvest. I realize it gives coops physical and that could affect our basis. Some of the potential gain in basis is wiped out by the fact I don't stop planting corn to sell for a good price....MikeM

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Veteran Advisor

Re: Why the need for price later?

It also lets a person haul a couple loads out of a bin, so you can get a better handle on how the corn is keeping, and not have to pay storage if you don't want to sell right away.

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Highlighted
Contributor

Re: Why the need for price later?

. My farm is all custom hire and I don't have any farm storage.  My crop is all going to the co-op in the fall and is either sold ahead or stored, if I use the DP my drying is only down to 15%, so I have less cost and less shrink and it costs 2 cents per bu less than putting it into storage until Jan 1. after that the extra charge per bu/day is the same.  Since I'm confident in my elevator's financial position I feel safe using it since I know it's going to be sold there anyway. I might as well pay about 5 cents per bu less to do the same thing in the end. With my situation I'm somewhat locked in so I might as well take advantage of the breaks I can.  They have title to the grain before I get paid, but that's why I said I'm confident in the elevator's financial position.  If I felt they were shakey I'd keep title for sure.  I figure they get to use the grain to fulfill their marketing program and smooth out their loading program. Is it really to keep them from having to push their basis or is it another tool to help facilitate operations?  Whatever the case I've got 5 cents in savings for allowing them to do it.  At some point the DP grain runs out and they have to raise the price to get more product so I can set my price then.   But I would like to be able price my fertilizer later.  Maybe even after it's applied and the crop's almost ready for harvest.

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Advisor

Re: Why the need for price later?

Good call , Don. I've never liked price later and , if given the chance, would vote to end the practice. We're just suckers. Our coops have big and good commitments, but not the corn.  Locally, someone is more interested in the profitability of the goldfield plant than the bottom line of his patrons.

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Veteran Contributor

Re: Why the need for price later?

There is no doubt utilizing price later hurts basis. I feel thats a small price to pay for all of the advantages. It lets me move corn at my leisure. I don't have to dry corn down as far knowing it will be out of my bins. Don't have to worry about it getting buggy. Probably the biggest advantage is knowing just how many bushels you have to sell.

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Honored Advisor

Re: Why the need for price later?

Why don't you sell directly to the end user to make the other 35+ cents?

If you are willing to take some risk,  why not just sell to the plant that pays weekly for a higher price?

 

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Veteran Advisor

Re: Why the need for price later?

Our local Co-op usually pays withiin 15 cents of the ethanol plant's bid, and lets me haul the corn in several months ahead.  That way, in early May, when the bid is way up because everyone is planting, instead of hauling, I can sell.  Sometimes, the basis opens up to 20-22 cents at those times, but only because the E-plant has to bid up their basis quite a bit, to get corn in May.  They only have 10 days storage, and by the end of April, are getting pretty low.  The last couple years, I caught 15 of the 20 cents up in basis they bid up, and didn't have to haul corn during planting season.  However, I don't think it will happen so much this year, as they started the price later thing sooner, and seem to be getting in a lot more price later corn than normal.  Strangely, for this year, I haven't been able to get much hauled.  Maybe July delivery will work out better, anyway?

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Senior Advisor

Re: Why the need for price later?

Now John! You aren't suggesting a little conflict of interest are you?

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