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Senior Contributor

Re: futures now

I found an interesting website from the University of Tennessee that has a downloadable Grain Haul Calculator Excel file.

 

Go to https://ag.tennessee.edu/arec/Pages/decisionaidtools.aspx and click the picture that reads "Grain Hauling Cost Calculator".

 

Then scroll down and click the link in the lower right hand corner that reads "Downloadable Grain Hauling Cost Calculator".

 

An Excel file will download to your computer that you can save and use. 

 

When you open the Excel file, click the tab at the bottom that reads "Grain Hauling Cost Calculator". Once there, click the button at the top that reads "Enable Editing" and you can input numbers into any of the cells that are shaded with a mustard color, and the calculator will tell you what your costs will be to transport. I think its accurate because it gives the same costs as you provided.

 

What's interesting to me is that the half dollar basis does not cover the transport costs for any grain elevator or coop that hedged their cash purchases with a sale of futures contracts and wants to make delivery if the transport distance to the CBOT terminals is more than about a hundred miles away.

 

Which makes me wonder what the grain elevator or coops that are more than a hundred miles away do to deliver grain against a CBOT futures obligation ? I would think the CBOT would have figured out a more amenable way for the grain elevator or coops to utilize the futures contract...I will make some inquiries to some people I know to get to the bottom of this. I can't believe that all of these cash buyers who want to hedge and deliver are all within 100 miles of a terminal, but maybe that is the case. For me its an interesting topic to look into for me. I'll let you know what I find out. 

 

Thanks for your info.

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Honored Advisor

Re: futures now

There's elevators around here that their grain never makes it to Illinois, livestock and eplants 40 miles away use it all. Grain can be shipped to the river by rail and goes by barge to N.O. but many elevators haven't had to load train cars in years....many no longer have tracks.
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Senior Contributor

Re: futures now

Well what about the cash dealers, grain elevators and coops ? Is the only availability to deliver into a futures contract open to just those located a hundred or less miles from a CBOT terminal ? These are the questions I am looking into, and why I asked in this forum if anyone had any ideas about it. I described more in another post, I am going to look into this further if for no other reason intellectual curiosity. 

 

I was taught that the moron is not the person who looks at something and asks why...no, the moron is the person who looks at something and does not ask why.

 

I believe that adage to be true. 

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Senior Contributor

Re: futures now

So basically the elevators and coops have developed a network of sellers and buyers so they act as regional exchanges and do not need the facilities of CBOT. Interesting. And I suppose that the amount of the basis is their profit, paying the producer the cash price being the futures price less the basis, and then selling the corn to end users at or close to the price of the futures contract ?

 

How hard would it be for the producers to develop relationships with end users, and bypass the middle men elevators and coops and cash dealers ? Is it hard to find out who the end users are, and is there a reason why a producer would not want to do business directly with them ? The idea being that as a producer, you know you will have a future harvest and if you had end user customers buying into the future, you could hedge future supply directly with them instead of a futures contract in Chicago that you can't deliver into. Just trying to think about how to get rid of this cost of basis that really takes a toll on producer revenues.  

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Honored Advisor

Re: futures now

The elevator is a "broker" basically for the feedmills and eplants, the futures price minus their basis is how the price is determined. If you sell 10,000 corn at the elevator, the mechandizer sells that on the board to protect the elevator. Sometimes they get cute andthats when the elevator can get in trouble.
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Veteran Advisor

Re: futures now

92  -  Sizable  position  in  Gold  -  interesting  -   now  yur  talking  -   -   -

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Veteran Contributor

Re: futures now

K-289 I hope you got in on Wednesday like I did! 

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