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Senior Reader

Basis: A license to STEAL !!

Let me start by first explaining my grain marketing opportunities in my area. My local elevator is 5 miles from my farm the next closest competitor is 20 miles away.We have an ethanol plant 8 miles away. Our local elevator has a corn receiving station at the ethanol plant.(They rent the bins,scale, and operate the scale house at the ethanol plant.) The ethanol plant then buys their daily grind from the elevator. The bid at the ethanol plant is usually a nickle higher than the elevator in town.Last week I delivered soybeans to the elevator. When I picked up my check,the manager asked me if I wanted to deliver my Feb. HTA corn contract to the ethanol plant because they were needing corn. I stated I was hoping for the basis to narrow.(It was at 50 cents) He said it probably was not going to change because of the rail car situation. Which makes no sense, as I am dumping directly to the end user. 5 days later the Jan. basis went from 55 cents to 49 cents. While the Feb. basis remained at 50 cents. I get an automated call from the elevator manager stating to expect a wait time if delivering corn as they are experiencing heavy selling. Two days later the Jan.basis went up to 60 cents. They did the same thing last spring to soybeans. They were up 25 cents on the board and they put a 15 cent protection on. This frustrates the #ell out of me.Can someone explain to me how this can be legal? Thank you for your thoughts.  FYI. corn is currently $3.06 for Jan. delivery

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Advisor

Re: Basis: A license to STEAL !!

I agree. It's the same here close to the ohio river. They are always talking barge freight and it drives me nuts. The outfit we sell to owns barges so they cry barge freight and they are the ones that help set the barge freight. It sometimes moves 10 cents  /bu. twice a day and they cry barge freight.

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Senior Advisor

Re: Basis: A license to STEAL !!

Ray is the best to post about this - But since he retired and Don't get up till Noon - Then I will put in my 2 cents worth and that is probably 2 cents to much - But it's all about margins ! There margins - They ( buyer ) sell there product or in your case ethanol  for so much a gallon - IF they added in the higher BOT numbers then one of two things - the end user would have to raise there price - like in the amount at the pumps this can cause less sells - in the gas may be lower - OR they would have to operate at a lose - Now boys - Do you think they would do this - just SO you can capture the higher price ?? IF anything - they will get there hands on it -  This is easy for them to do as they own the bat , ball and bases !

 

Margins , Margins , Margins !    There's    lol

 

 

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Honored Advisor

Re: Basis: A license to STEAL !!

you mean .... bat, ball and basis.  Those monopolistic noncompetitive markets that come from cutting out the middle man while the feds can't see past the political contribution.

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Frequent Contributor

Re: Basis: A license to STEAL !!

It sounds like they were getting all the corn they needed if they were warning about wait times.

 

I have never known an elevator not to widen a basis if they are swamped with grain.

 

We would do the same thing in our farming business if we had the chance.

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Senior Advisor

Re: Basis: A license to STEAL !!

Another question on elevator pricing -- sometimes when I have unpriced grain on open storage at elevator, notice the elevator will pay more for grain coming in from farm bins than they will pay for grain already there, which gets frustrating.  Should be no difference to them.

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Honored Advisor

Re: Basis: A license to STEAL !!

interesting thought.............

 

WCMO      Often it is all about Wisdom of Management and people skills at the Coop....

 

Would it be better if the coop bought the bushels at the same price, and paid the farmer storage for the use of his bins?

 

Or should the farmer with bins be expected to store it for the elevator for free?

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Honored Advisor

Re: Basis: A license to STEAL !!

you mean .... bat, ball and basis.  Those monopolistic noncompetitive markets that come from cutting out the middle man while the feds can't see past the political contribution.

 

clarification 

 

I do not expect government to step up and roll us back 50 years and create a strong small business economy.

 

I think it is the new ag economy.  A coop has a bad choice or a bad choice.  Either their membership will go around them to get a better price or they are forced to align with ethanol or another end user to provide supply and value to the end user........... or both.

 

It looks to me that the producer will need to have a position with an end user, either personally or through the coop, at some point just to have a consistent market. That relationship needs to have some relationship to profitability.   If not deep pockets and a lot of storage is needed to lengthen the marketing time period in order to profit on volatility. 

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Senior Advisor

Re: Basis: A license to STEAL !!

SW, I didn't really understand that.  I pay the elevator for storage, and I have bins that I paid for.  Either way, I have already, or intend, to haul them my grain.  Either way, the price should be the price.  I think when they pay more for grain off the farm, as opposed to grain already in elevator storage, it is simply a ploy for more market share -- pay more for additional grain from farm, pay less for the captive supply already delivered & stored.  My reaction -- if I can break even or better by hauling further down the road, I will, but not much I can do about what remains on open storage at elevator other than to keep pulling the trigger when price suits.

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Honored Advisor

Re: Basis: A license to STEAL !!

My point is that if you have grain in your bins that is going to end up at the coop where your other grain goes.  You are in effect donating your storage to them.  They have more capacity.

Yes they are not going to charge you for your storage.  But you deserve something for that donation and the committment to not bypass them to an enduser.....

 

Most elevators operate on a 35 to 40 cent in and out charge plus storage when they move that grain on to the market.

If your going to sell them your grain and provide the storage facilities,  why should you get 0 for that facility.  The storage is your savings no matter where you sell your grain.

another way to look at it.........If you are going to be the storage company as well.  Why would you sell it at the same price as the grain that has no storage... There are endusers who will pick it up for a better price than that...

 

You should expect more than just storage for the bins,,,,, 

We are getting 40 cents better (their trucks) to feedlots than the price our coop is paying.  From our bins ........... we save the storage fees, save the freight and add the 40 cents.  The ethanol plant in our area will do the same for 10 cents less.   That is similar to what the elevator gets when they buy grain from a customer and sell it to the same end users.

Why shouldn't the coop offer 10 cents extra to get more bushels to make 40 cents on.  

The alternative is they don't get the grain and don't make anything for it.....  Your handling and storage is worth more than you think...

 

We do the same with beans and send them 240 miles away to a processor. usually netting more than corn..and they send trucks cheaper than we can deliver them per bushel.

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