Sophisticated Farmers Cut Out Trading Giants in Profit Hunt
More options now after building more silos, buying more trucks
Shift in how U.S. crops move spurs more competition for supply
by Shruti Singh, Jeff Wilson, and Mario Parker, Bloomberg
June 15, 2017
It wasn’t that long ago that U.S. farmers like Brian Marshall had few choices about where and when to sell their crops, which meant taking whatever price was offered at the local grain elevator during harvest season.
Today, the Missouri grower stores his own corn and soybeans, sells them whenever he wants and arranges deliveries directly to processors or exporters. That could spell trouble for global agricultural companies including Archer-Daniels-Midland Co., Bunge Ltd., Cargill Inc. and Louis Dreyfus Co. that generate billions of dollars providing those kinds of services to farmers.
“People are doing a lot more things in house,” said Marshall, 40, a third-generation farmer who works with his father on more than 4,000 acres near Kansas City. “You cut out a middleman or two.”
American growers are taking advantage of technologies that weren’t around two decades ago to squeeze more profit from crops, especially after record harvests left global surpluses and plunging agricultural income. Up-to-the-second price and weather data accessible by smartphone make it easier to sell every bushel, while email and social networks give farmers more information to make decisions. They’ve also expanded storage capacity by 20 percent since 2003, government data show, reducing their reliance upon local elevators.
At the same time, buyers like ethanol maker Green Plains Inc. are bypassing the big merchants to make direct purchases from farmers. With grain and oilseed crops valued at about $108 billion last year, the stakes are high for companies that have made their living for generations with vast networks of trucks, grain elevators and barges.
“Major grain companies built a business model to buy grain as cheaply as possible at harvest and store it until prices improved,” said Steve Nicholson, vice president of food and agriculture research at Rabo AgriFinance in St. Louis. “That plan to merchandise big volumes of grain covered up a lot of sins. The big grain companies just don’t control the volume like they used to.”
On the Marshall farm in Missouri, gone are the days when Brian’s grandfather was forced to take freshly harvested corn straight from the field to an elevator four miles away. There’s also no need for his mother’s once daily ritual of calling eight or 10 elevators to unearth the best prices. Now, the family can store crops for months, get prices from thousands of miles away and use their own trucks to haul crops as far as necessary to make the best profit.
Better Seller ...
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