Technology Brings Shift in How U.S. Crops Move– Trading Giants Cut Out

Bloomberg writers Shruti Singh, Jeff Wilson, and Mario Parker reported yesterday that, “It wasn’t that long ago that U.S. farmers like Brian Marshall had few choices about where and when to sell their crops, which meant taking whatever price was offered at the local grain elevator during harvest season.

“Today, the Missouri grower stores his own corn and soybeans, sells them whenever he wants and arranges deliveries directly to processors or exporters. That could spell trouble for global agricultural companies including Archer-Daniels-Midland Co., Bunge Ltd., Cargill Inc.and Louis Dreyfus Co. that  generate billions of dollars providing those kinds of services to farmers.

“‘People are doing a lot more things in house,’ said Marshall, 40, a third-generation farmer who works with his father on more than 4,000 acres near Kansas City. ‘You cut out a middleman or two.'”

The Bloomberg article noted that, “American growers are taking advantage of technologies that weren’t around two decades ago to squeeze more profit from crops, especially after record harvests left global surpluses and plunging agricultural income. Up-to-the-second price and weather data accessible by smartphone make it easier to sell every bushel, while email and social networks give farmers more information to make decisions. They’ve also expanded storage capacity by 20 percent since 2003, government data show, reducing their reliance upon local elevators.

“At the same time, buyers like ethanol maker Green Plains Inc. are bypassing the big merchants to make direct purchases from farmers. With grain and oilseed crops valued at about $108 billion last year, the stakes are high for companies that have made their living for generations with vast networks of trucks, grain elevators and barges.”

Yesterday’s article added that, “Marshall stopped paying big grain handlers to store, dry and haul crops for his family farm over the last several years, but he’s also starting to ween his business off their marketing services. Last year, he asked a global grain trader to sell 15 percent of his soybean crop before it was planted. It went for around $8.50 a bushel in March 2016. After the harvest in October, Marshall stored some of his soybeans and recently sold them for $10.14.

While there’s still market risk no matter who holds the crop, Marshall says during the past year he did just as well as or better than the professionals without having to pay them a commission.”
