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Prairie Farmer - June 2008

Compare Channels for Grain Marketing

Garrett Stoerger
Department of Agricultural and Consumer Economics
University of Illinois at Urbana-Champaign

Grain delivery options for many farmers have become more abundant in 2008. The rapid growth of the ethanol industry is creating additional use for corn and providing farmers alternative locations to sell their grain.

To be competitive, each location may offer different delivery incentives ranging from a stronger basis to less expensive drying and storage. A question you may ask is: How do I know which delivery point generates the highest net price per bushel?

Running the numbers for this delivery comparison requires taking several different factors into consideration. Luckily, members of University of Illinois farmdoc have a quick and easy solution in the form of an Excel spreadsheet.

The Grain Delivery Model is one of the Farm Analysis Solution Tools developed to answer the question of highest net price per bushel.

This tool is capable of analyzing three different delivery points simultaneously using the data you provide for each location and some basic assumptions about how long you will store the crop. You can also calculate the cost/benefit of storing grain vs. selling at harvest.

And best of all, the Grain Delivery Model, like all FAST programs, is available for download free of charge at www.farmdoc.uiuc.edu .

Additionally, an online demo and program description are available to further demonstrate the FAST tool's usefulness.

Delivery example

Suppose you are thinking of delivering grain to one of three locations: an elevator, an ethanol plant, or a processor. The elevator is your closest delivery point, but has a weaker basis than the other two locations. You plan on selling to the ethanol plant and processor at harvest, but will defer until January at the elevator. Cash prices today are $5.90, $5.80 and $5.78, respectively.

The table on this page displays three delivery locations and how they compare to one another. In this example, assume each location will receive 1,000 bushels of dry corn (15% moisture) for simplicity.

In case you are wondering, the tool is capable of computing both drying costs and shrink factors as applicable.

The table displays both the revenue from the sale of bushels and the costs associated with transportation, drying, storage and interest.

Elevator 1 initially has the highest level of revenue from sales in this example. However, because the grain is stored until January, storage and interest costs take a toll on the net revenue earned.

Moreover, the processor ends up with the highest net revenue per bushel at $5.58 even though it had the lowest initial price of $5.78 upon delivery. This example demonstrates how the highest initial price offered does not necessarily result in the highest net revenue received.

If you have multiple grain delivery options available, be sure to determine which one yields the highest net price per bushel by utilizing the capabilities of the Grain Delivery Model.

Stoerger is FAST coordinator with University of Illinois Extension .