Posted on January, 19, 2023 at 09:35 am
Despite its specific harvest season, corn serves as a year-round source of food, fiber and fuel across the globe. Growing it and harvesting the product are half the battle, the storage and shipping of it, then, happen after farmers step out of the process.
That’s where grain elevators step in. Invented in 1842 — and drastically improved since then — the massive devices take in harvested product, prepare it, and store it in massive bins. At Wellman Produce, Co-Owner Derek Gordinier said the product could stay on-site for a year and a half, in containers that can hold 215,000 bushels.
That’s around 12 million pounds of corn, per structure.
The facility makes money by renting storage out to farmers, or buying corn and soy to store on-site for a later sale. Rather than sell the commodity, however, the business sells futures, promising it to buyers at a set price on a specific date.
“We calculate what we bid on corn and beans on what’s actually a really thin margin,” Gordinier said. “It’s two cents on corn and three cents on beans, per bushel, once adjusted for freight.”
By selling futures, the company ensures a constant input for the supply chain.
“When there’s a whole lot of corn, i.e., harvest or when there’s a big crop … we are paying less than what the board of trade price is,” Gordinier said. “If corn then gets scarce … the basis might be higher than the board of trade price. You’re taking the risk, but what you hope to have is being able to buy at a basis that’s lower than what you sell.”
As the market’s middleman, Gordinier’s place in the grain industry is less visible than a farmer’s, but just as important.
“It’s very hard for the farmer wanting to sell the grain to match up with the farmer who’s wanting to buy the grain at the same time,” he said. “Obviously the person that’s selling it wants to get the highest price they can, the person buying it wants to get the lowest price they can. Since we don’t really care where that … goes up and down, I can buy high from this farmer, turn around and sell low to that farmer, and as long as the basis didn’t change, I don’t care. So we can facilitate those transactions.”
Gordinier said the work was less glorious than the production side of corn, but equally rewarding.
“To do it economically so that not only they can make money, but we can make money also, that is our service to the community,” he said. “Buying and selling grain, is that what gets you out of bed in the morning every day? Probably not. But it’s a necessary part of the business.”
Source: South Iowa Union