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The Future of Grain Marketing

Farmers are urged to use the available marketing tools.

Grain marketing was never simple, but technological advances in the past decade have made it a bit easier for producers spending long days behind the wheel of a planter or a combine to make business decisions.

Growers can now check prices at the local elevators, nearby ethanol plants, or even larger grain facilities farther from their normal delivery area on their smartphones to see where to take their grain. Instant access to brokers via phone, text, or email also helps producers hedge their crops in real time, and some companies are developing apps that take all of their data to help make marketing decisions.

Wi-Fi in rural areas and the proliferation of smartphones and company applications that allow instant and constant connectivity have, without a doubt, improved farmers’ ability to make marketing decisions, but it only helps if they’re willing to use all of the tools at their disposal.

Some farmers – mostly those who are less technologically inclined – are slow to adopt advanced grain-marketing technologies. While it may be surprising to some, the divide isn’t necessarily due to age or longevity in the industry, though the consensus is that younger farmers are more willing to adopt new services, according to analysts and brokers who spoke with Successful Farming magazine.

“We’ve come a long way in the past 10 years to where we are today; you don’t have to call the local elevator, they post their bids, and there are services that can get you a price up to 500 miles away,” said Ed Usset, a grain marketing economist at the Center for Farm Financial Management at the University of Minnesota. “But technology isn’t going to make a decision for you. You still have to make the call, and technology hasn’t replaced that.”

Many farmers are unwilling to give up any control of their marketing decisions, said Jason Britt, the president of Central States Commodities in Kansas City, Missouri, whose family owns a farm in the northwest part of the state.

As with many small business owners, producers are very individualistic and like to maintain management of all facets of their farms. Some new technologies may take too much control, he said, which can be intimidating, especially to those who’ve never had to rely on a computer.

“My dad still writes things down in a notebook or even keeps things in his head,” Britt said. “He’s 72 years old and has been successful doing what he’s doing. My uncle would be more inclined to use (new programs), though, because he likes dealing with computers.”

Companies such as grainhedge.com from Bozeman, Montana, for example, offer programs in which you can input your location and get grain bids for hundreds of miles, sell grain online, or make hedging moves directly from your phone or tablet.

Kevin McNew, the president of the company, said he’s always believed that some farmers want the ability to market their grain themselves without the help of a broker whereas other wouldn’t even consider such an option. Neither way is wrong or right, he said.

“For the last 20 years, I’ve had the belief that farmers want the ability to do everything themselves whether it’s marketing their grain or executing a trade,” he said. “The technology has been growing and evolving over the last two decades, so offer them a DIY option so they can do it all themselves rather than rely on outside advisers.”

Age isn’t a factor in adoption of the technology his company offers, said McNew, who has customers ranging from their 20s to their 80s. As Central States’ Britt said, farmers are extremely individualistic, so saying older farmers won’t adopt new ways of running their businesses would be a mistake, McNew said.

“My prevailing view is that you can’t have a prevailing view about farmers,” he said. “It’s not about age, but the willingness to empower themselves with data and intel that helps them make a better decision. There are new innovations coming on line and some people are going to adopt them; some people aren’t. Some people want to do it and some want to rely on a trusted adviser. Farmers don’t fit into one bucket.”

Prior to the spread of rural Wi-Fi and cell phones, it wasn’t unusual for a grain elevator’s or broker’s phone to start ringing at about midday and not stop for a couple of hours, Britt said. Mostly it was farmers calling in to get bids while he was taking a break for lunch, he said.

“People used to come in at noon or call and ask what the markets are doing or listen to the radio, but cell phones have changed everything,” he said.

It’s just a matter of time before the next big thing comes along that will change the face of agriculture marketing, Britt said, despite the fact that advancements in grain marketing technology seems to have at least slowed in the past few years. “I hate to say it’s plateaued – people have said `what more can they put on an iPhone’ and they keep coming out with more and more stuff for it,” he said. “There are definitely more advancements that can be made.”

Even with advancing technology, grain marketing has become more difficult in recent years, as the prices of grains and oilseeds have dropped while input costs steady or increase, the University of Minnesota’s Usset said.

Five years ago when corn was at $5 or $6 a bushel, it was easy to market grain because it was difficult to lose money. Now, growers must watch every turn of the market to take advantage of buying or selling opportunities.

That, he said, is where technology can be extremely valuable.

“You really have to sit up and pay attention,” he said. “There was a time, maybe going back almost five years, where you made money if you were a good or bad marketer. The question was how much. Now you have to pay more attention. There are news ways to stay in touch with the market, that’s the easy part, but these days you really have to grind it out.”

Al Kluis, president of Kluis Commodities and Kluis Publishing, and a broker since 1976, said he’s seen technology evolve in the more than four decades he’s been in the business, and he’s embraced it. His company offers its AlNow App that gives up-to-date quotes and market commentary to customers. He also does market webinars and keeps customers apprised of market news.

The most important tool a grower can have is data, Kluis said, and he truly believes that those adopting new technologies are the ones who are growing their businesses. Still, using the latest and greatest thing isn’t for everybody, and farmers must take the route that makes them the most comfortable.

Britt said regardless of what new programs or apps come out, at the end of the day, it’ll be the grower who makes the final marketing decision. Producers sometimes don’t listen to brokers with whom they’ve worked for decades, so asking them to turn over their business decisions to a computer program that’s unproven will definitely be a hard sell.

“I’ve been doing this for 23 years and I know the farmer mentality,” Britt said. “There’s always going to be a little bit of aversion to turning things over to a computer or even another person because most of them got where they are as individuals. There are some good programs out there, sure, and a lot of times they’ll find they’re marketing themselves on the top third of the range rather than the bottom third, but it’s going to be tough to get everybody on board.”

 

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