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Senior Contributor

Wheat discounts

Was wondering if any body else has deep discounts on wheat like we do in ND? If you have spring wheat that is 12 protien you are discounted $1.00 per point. Spring wheat is suppose to be 14 pro so we lose $2 from the minneapolis price of $5.40 which is $3.40 minus a $.65 basis and we are below $3.00!!!!! The last time i got that price fertilizer was $160 a ton not $450. Anhydrous was $250 not $725-800. Canola seed was $250 not $625!! A new 535 HP tractor was under $200,000 not $350,000. Not sure how this will work......any ideas??
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14 Replies
Veteran Advisor

Re: Wheat discounts

help out a person who doesn't delve into the details of wheat

 

does crop insurance get involved due to those $2 discounts for low protein??

 

TIA

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Veteran Advisor

Re: Wheat discounts

I guess the question is whether there really is a pool of good wheat out there that will allow all of this blending and making the big money .......or maybe the issue is that there may not be a pool of good wheat for at least another year.....

 

since farmers don't need the space, why are they not hanging on to the wheat for another year and then they will be in position to make the money??

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Senior Advisor

Re: Wheat discounts

Southern MO has better quality. Not great but better. It will be good enough to blend. Also end users will over time lower their grades accepted as they figure out quality is low and will drop dock and raise premiums for decent quality. Farmer will never see this

Local elevators didn't even take wheat in this year. They flat didn't want it cause they knew they would have to deal with the big boys just like the farmer and get screwed

The larger grain buyers will find a way. When you are buying it for pennies on the dollar you can afford to spend a few to ship it into better quality terminals and blend it out

Those that have bins are storing it. With all the PP there will be a demand for some of it to go back into the drill here pretty soon

Please don't try to defend the grain buyer side of it. I have seen the underbelly of the beast. I know they have a job to do but at the end of the day the farmer takes it on the chin

Buy retail. Sell wholesale. And pay freight both ways

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Honored Advisor

Re: Wheat discounts

It seems that the farmers only recourses in these cases are:

 

1.  Do not do business with the elevators that take advantage.

 

2.  Plan on storing wheat for a longer period than normal.  It seems that wheat that is handled several times and moved in winter months is not subject to these large discounts.  Just play the game the elevators are playing.

 

3.  Quit raising wheat all together.

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Frequent Contributor

Re: Wheat discounts

In my career I have run into thos type situation 3 times. First time as a maerchant when MI has 38 - 44# corn. It all got railed to the ohio river and blended with 60# local corn. Merchants made a ton. second time was aflotoxin in 2012 on this farm. 3rd time is now with vom and damage in wheat.  What I learned from the first time is that if you are a farmer never be in the position to have to be at the mercy of the commercial. This requires storage and storage expertise. It also requires expert information.

  Your crop insurance agent is one of your most valuable assets and crop insurance programs are set up so that the producer can put the odds in their favor and the dollars in their pocket. In 2012 the goal was to bin all the corn, get a high aflo test and then merchandise it out at no discount. Afte acquiring alot of info it was communicated that if the corn was run through the correct type of grain vac that most of the aflo would go bye bye. Mission accomplished but one has to act like and not be at the mercy of the commercial. 

 Which leads us into this year, the goal should be to bin it, get a vom test of 5 - 9.9, a high damage grade and a sample grade cert from the state. That gets one something like 85% indemnity. Then merchandise it or more specifically make it merchantable with much less discounts. Grain cleaning may need to be involved but more than likely one could remove the worst 15%, reduce vom dramatically and increase t.w. dramatically. 

Frequent Contributor

Re: Wheat discounts

Lets say one doesn't have enough storage, then merchandise the stuff out. Why are guys taking .35 per bushel when some delivery locations have a 1.50 minimum. 1.50 plus a high insurance payment sure beats .35 plus a high insurance payment. Run it through a cleaner and gravity and you may get that up to 56# and 4 vom which will be much more merchantable in 6 months and you get your  insurance indemnity.  Cae in point, i just did a test run on our first seed wheat variety which won the north central MO trials this year. It was the last wheat we harvested and had a harvest t.w. 60#. It got sprayed with prosaro twice, a half rate each time 2 days apart. Initial bin germ is between 82 and 86 with vom in the 4 range. Coming off the gravity table I checked the seed going in the bag and the t.w. was 62.5#. The light high vom stuff coming off the lower end of the gravity was 53.7#. The clean-out was running in the 15% range.This stuff can be seperated out using a gravity table. I would bet that farmers could get seed houses to run commodity wheat through the plant for 75 cents a bushel. Their variable costs are quite low probably less than 25 cents a bushel. It could be a great money maker for both parties.  Another option, call mike at precision farm products. He told me on the phone that he knows of a cleaner that can be farmer purchased that can seperate alot of it. There are options but you gotta have bins and you gotta be willing to act like a merchandiser. JMO

Honored Advisor

Re: Wheat discounts

Ehoff,

 

Bless ya,,,

 

There are minds that think in and and some that think out of the box.  But the cripling reality is many minds reduce the size of the box in times of problems.... options are few...... when in reality we have a lot of options...... with a little work .....

 

 

Appreciate the examples you give.......

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Veteran Advisor

Re: Wheat discounts

well if i was smart....i would have those bins, and the seed cleaners.....i've seen times when we had 9% moisture,

you know, if you had some sort of misting system, you could bring the wheat up, and gain weight...legal....know

of one elevator that used to play that game.....they also had a cleaner, and they also had what they called

the mixer, it was basicly like a cement mixer, and they mixed grain...one year they had to dump wheat on

the ground, in this small town wheat was dumped on the oiled roads for several blocks.....the elevator owner

was happy.....i thought he would have lost his rear end....but rather, gained weight from some light rain and

also picked up some gravel, etc.

 

i've been getting some interesting bids the last couple of years.....yes, i can get a semi out durning harvest but

that is very high....one terminal has offered giving me cheaper trucking a month or so after harvest, and i've

also been offered in the winter/spring, they would come after it for nothing.

 

yes, you could beat them at their own game, but you must be sharper than a tack...and i'm a dull ole nail.

 

but all the above takes time, money and some experience

 

also total mind set change.......more than likly no business done locally

 

 

and i don't do a very good job of marketing myself, but i guess we are going to need to.  best way i can see is

to draw a line in the sand......when makets go up, then roll up.

 

but what gets me, being elcheapo, i want to do it as least cost as possible.....i'm always conflicted as to "when to jump in",

with the theroy being wait till it get up, so you don't have to roll much......and you guessed it, you never get it done.

kind of hard to pat yourself on the back when you take a market position when things are low tho.

 

yep, it's a brave new world.....and i'm a big chicken.

 

but at least my brain still works (some days)....i was telling some "young buck", all of this and how to do it, and I was

informed i was "too old".......well it will be quite some time till i'll get rocking chair money (if anything less)

 

people have become so complacent about things....the saying that everyone uses, that drive me nuts, "it is what it is"

shows that......if you don't examine "it", and figure it out, perhaps you too will give up.

 

alot of apathy today......but can you blame anyone ???

 

 

ok, i'll shut up now

 

 

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Veteran Contributor

Re: Wheat discounts

The discounts we have recieved for wheat under 14 protein has been nothing but stealing by grain industry here in North Dakota this has been good quality wheat low damage, high test weights, good falling numbers etc except for protein content. We have been discounted number of times to below winter wheat price where all we had to do was make 12 protein there.  Wheat products in grocery store continue to go up when price of commodity goes down. When wheat went up the rises on retail end was all do to cost of commodity going up and now when commodity goes down this represents only small portion of the price.  They are having there cake both ways and nobodies call them out on this.

 

We have been storing wheat but so far to try to improve our price through marketing the crop but windows of improvement have been small and contracting it ahead just means they can come in  discount you further and you have to deliver the wheat with the new discounts. To lock in the discounts you have to go highest discount bid of 12 and under protein which is severly discounted and when you have wheat that is 12.5 to 13.5 protein range its difficult to just take the bottom price which is loss in final numbers. When wheat was high back 3 years ago there was no discount for protein all wheat from 11 protein to 15 protein was the same. Now we have discounts as high as 20 cents a fifth on protein so when sampling truckload small sample size and you find pocket of say lower protein wheat could effect a price swing of 40 cents or more for wheat. Multiply that out on say 55 bushel per acre yeild and 40 cents has effect of $22 per acre differnce of making a profit or loss. This is what we have been dealing with last 2 years and has effected last 3 crops if you had stored grain to market. My guess is if this continues were going to see farmers fail here in North Dakota because  losses are mounting for all farmers especially us in Norther North Dakota where wheat remains one main crops in crop rotation because of  our climate limits us on growing another crop like corn. Also the investment of switching to growning corn is another hurtle to growing corn for many here it would require more than million dollars investment in bins, dryer systems, and other grain handling systems along with additional labor to be found and then investment in machinery to grow corn. When you add that up there would be no profit in switching right now and that is what we are left with eventually number of farms may work them to this as gentics improve and can gradually make investment in growing corn but its not quick fix for number of farms here.

Crop insurance does not cover protein here and neither does the farm program based on price because we may have low protein here in number of counties because price of wheat is determined on national average for wheat not local price many may be recieving. If The government program whould have based the average price we were recieving off  what we were recieving locally then that baseline for wheat of $5.50 would do something for us. The way it is now we recieve nothing and have been below that 5.50 mark up to $2.00. Now if we were recieving this difference by farm program we could be surving these discounts.

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