More competition for grain brings more opportunities for marketing. And with some of the new electronic avenues available, farmers may shift from price taker to price maker.
"Corn tends to stay here as feed," says Rod Benson, feed department manager, Cenex Harvest States (CHS) Marshall, Tracy, Minn. "But we are seeing a lot more competition for corn. Ethanol plants are popping up like dandelions. We have eight to 10 plants within a 60-mile radius."
Benson says they were looking for ways to take business to the next level when they learned about the DTN Grain Portal, part of DTN MarketSpace. CHS Marshall signed on with DTN to provide online pricing opportunities for its feed and grain farmer customers.
ELECTRONIC ORDERS. Through the portal, farmers can enter an electronic order for the price they would like to receive for corn or soybeans. End users can see what price farmers may offer and put in orders to buy. "The odds of a reasonable transaction getting done are good," Benson says. "Market volatility generally satisfies both the buying and selling customers."
In February, DTN launched DTN MarketSpace, an innovative cash grain online marketplace, which connects the DTN Grain Portals with DTN's Online Producer products to facilitate communication and conduct business deals.
The DTN MarketSpace is designed to centralize offers in one convenient, automated system, says Mary Tangen, product manager with DTN. Farmers with grain to sell have 24/7 access through local participating grain companies' web sites, like CHS Marshall's, to make offers. Producers using DTN's Online Producer Products also can interact with DTN Portals. Buyers receive the offers and decide whether to accept them. Licensees determine what commodities are bought and sold.
"Farmers traditionally call their elevator to communicate their marketing plans," Tangen says. "The portal does not replace personal interaction, but it does automate the process. Farmers have more accessibility to grain bids and a way to communicate what they want for pricing when it is more convenient timing for them to do so. The portal shows them delivery commitments and records of open and closed offers."
Tangen says already more than 10,000 farmers from 18 states and four Canadian provinces have registered to use the network. Of the DTN portal locations, 67% are elevators; 24%, ethanol plants; 6%, processors; and 3%, feedlots.
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Using DTN MarketSpace means cash grain markets are no longer restricted to traditionally small trade areas, instead connecting buyers and sellers in broader geographies.
"We have three major buying locations, and the portal allows us to wrap our arms around bids and information for all locations," says CHS' Benson.
He also notes the simplicity of the system is a plus. Generally, he spends three to five minutes explaining the system to a customer and providing a password for access. Farmers can put bids out and use futures, basis or cash-only contracts. Once an order is filled, the farmer and buyer are notified instantaneously by e-mail and cell phone.
But the users can't expect orders to be filled immediately. "You can't expect an instant response that allows you to lock in your price right away. But you can expect an offer to be filled next week, next month or next year," he says.
Tangen says agribusinesses like CHS Marshall pay to license the portal software from DTN. Farmers who use DTN MarketSpace incur a nominal per-bushel fee if they exceed certain levels of transactions.
"We help streamline the decision-making process. It is not unlike online banking," Tangen says. "Farmers tell us they are comfortable with the system, and we believe greater adoption will happen."
FULL AUTOMATION, NO EMOTION. Jason Tatge, Farms Technology LLC, CEO, agrees the future holds greater use of electronic marketing. He notes for the first three quarters of 2007, electronic trading accounted for 44% of all agricultural contracts at the Chicago Board of Trade.
Farms Technology recently launched the e-Pit system, a computer-based, automated hedging component for their Dynamic Pricing Platform (DPP). A farmer can post an offer to deliver a commodity to a local buyer, specifying the quantity, delivery period and cash price desired. The buyer assigns a futures contract and basis level, and the DPP monitors the market for a hedge fill during day and evening futures market trading hours.
"No people are involved with the computer system. It can pull the trigger on both sides of the transaction," Tatge says. "Farmers can now make a sale immediately."
DPP volume has been growing about 25% per year. Farmers are charged a one-cent-per-bushel fee only if the transaction completes. Farms Technology has 88 buyer delivery locations serving the farmer base.
CONVENIENCE CATERERS. Since 2001, Cargill has offered customers opportunities to sell up to half of their expected production through ProPricing forward grain-marketing contracts. Now, Cargill customers can make more convenient, "one-stop online marketing decisions" through CargillAg.com.
One unique feature, adds Doug Roose, grain marketing products manager, is the electronic signature soon available in many locations that eliminates paper contracts. Password-protected access in 2008 will allow farmers to track grain sold, contract status, actual sales versus estimated production, average prices and more.
For 2008, Cargill added a new ProPricing Select contract, which allows corn, soybean and wheat farmers expanded access to grain marketing professionals and market outlook webcasts, free market quotes via cell phone and online pricing updates.