When is a commodity no longer a commodity?

Grain while usually thought of as a commodity that is all the same. Is not. There are different quality attributes that certain buyers are looking for, for a specific uses. Some will pay premiums for specific quality attributes (i.e. protein, kernel appearance – immature, broken or green kernels, dockage/screening, moisture content, disease issues). Premiums for certain quality depend on if there is a lot of that attribute available in a given year or not.

What are you selling?

Marketing grain starts with determining what quality we have in the bin. We take samples from bins to 2-3 elevators for grading. Not all elevators grade a sample the same, so we shop around.

This year there is a lot of fusarium (a fungal disease the produces mycotoxin) in the Canadian durum market. Then October came and harvest stopped virtually everywhere, further downgrading the crop that had yet to be harvested. This also gave everyone (farmers and elevators) time to determine the extent of the quality issues in the Canadian market.

There is a maximum level of tolerance for fusarium. Levels that make it unsuitable for human consumption, and even higher levels are unsuitable for animal feed. Within the system elevator companies can blend product to reduce the amount of fusarium. But large amounts can be difficult to handle, resulting in large market moves down.

When are you selling?

Once we know what we have, we can decide when we are going to sell. We subscribe to 2-3 market analysts, they provide information on global supplies and expectations on where the market risk is at, will the market move down or not. They also provide recommendations on what percentage of production we may want to have sold.

Delivery

As grain gets sold, someone will start hauling grain to town. Most is hauled 75 miles one way (125 km). This can take all winter long…

One response to “When is a commodity no longer a commodity?

  1. Pingback: The lull of winter | Grant Ranch·

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