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Eastern Half of Ohio | I assume you are referencing ADM's Advantage, Cargill's Pro Pricing, Gavilon's Producer's Edge and a whole slew of offerings from other comparable companies. They are all traded by proprietary professionals that are attempting to maximize the price on those bushels. Just happens to be those guys were extremely bearish from November of 2015 onward and got caught in a buzz saw. I would argue many folks on both sides were thinking we could see soybeans with a 7 in front which helped the producer hand bushels over without a second thought. Some might call that the panic phase.
Grain Companies will sell short dated and full term options against a portion of the collective bushels that each companies' respective team trades. $8.26 seems abnormally low. It almost sounds like a guy really wanted out of the program prior to the expiration of the pricing window so the offering company had to buy a call back to settle his contract.
I believe you have inferred they use these contracts to lock margins in for their corn processing divisions. Not sure I buy that line of thought. These contracts and the big marking push behind them is the result of a significant expansion in grain handling facilities which led to excess capacity resulting in tighter handling margins. Thus people start looking for ways to get that margin back. Contract Service Fees are what they are after. Just so happens to be some contracts haven't performed well this year thus consumers are not happy with the service they were provided.
Something I think you have promoted as well as others was that guys need to be setting target offers at profitable levels. I know my Dad and brother looked at me funny when we had $9.40 SX hedged after the market took off, but we are going to make money at that value. Reality is marketing a crop is work and means we all better dig into our financials figure out what we are happy with and find a way to get there.
One thing I would encourage guys to do is reach out to your local originator and make him/her part of that plan to help your business achieve success. There are a lot of good guys/gals out there that want to see farmers succeed but they will be able to bring better ideas to the table if you make them part of the process. My general line of thought is that very few 100+ year old companies have lasted that long with the win-lose business model. Sometimes us farmers need to be better customers... | |
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I Will Invite
