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| The only grain in the facility that constipates the grain flow is unowned grain. DP is basis ownership. When weighing the value of cash ownership in any form, board spreads, freight values, competing commodities, harvest elevation margins, customer service, daily grind, etc all are part of the decision making process. Cash marketing and sales across the scale are still where the bulk of first purchase grain purchases come from. More bushels getting hedged.
DP is a strategy to get Ownership and therefore control of the cash bushel the market was unable to buy during gut slot harvest. The market has to pull that grain out of the bin and understands having missed the cheap initial basis buy. Market will take what it can get so offers DP to salvage missed basis appreciation and storage revenue.
Grain facilities will not pay the bills with a “catch and hold” approach to origination. Seasonal house? Perhaps.
Shuttle network designed to move grain.....not to catch an extra 10 cents on storage or DP.
CME values space at 8 cents per month.....While its a larger equation.....it is evident that in general commercials are not tripping over themselves to give up control of their space for 8 cents per month.....inferring the control of that space has greater value.
In general the Program bushels are a customer building program while allowing the merchant to add value in the second, third, or fourth transaction those bushels allow him to make with a lower risk. The “ownership” gets passed around within the facility network depending on state or federal warehouse license to maximize value of that ownership......huge opportunity during inverted markets. | |
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Beans
