Grain Marketing Tools: A Survey of Illinois Grain Elevators

As with most sectors of the agriculture economy, the U. S. country grain elevator industry has experienced considerable consolidation and concentration. By the same token, the country elevator's customer base (grain producers and landlords) has also changed rather dramatically as grain production takes place on larger and fewer farms. The profitability of operating a country elevator is directly related to the volume of grain the country elevator purchases over the course of a marketing year. Because the basic services offered by country elevators are very similar (purchasing, conditioning and storing grain), country elevators attempt to differentiate themselves from their competition by offering customers a variety of cash grain marketing tools. These tools range from the basic cash forward contracts to minimum price contracts to the so called 'new generation grain marketing contracts'. The primary focus of this paper is to determine the marketing contracts grain elevators offer to their customers and the extent to which these contracts are used by the elevator's customers. Additionally, the types grain contracts offered will be compared to the firm's storage capacity, business organization, size of customer base, geographic location and type of grain purchased.Crop Production/Industries, Marketing,

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Food Consumption/Nutrition/Food Safety,

Grain Marketing Tools: A Survey of Illinois Grain Elevators

As with most sectors of the agriculture economy, the U. S. country grain elevator industry has experienced considerable consolidation and concentration. By the same token, the country elevator's customer base (grain producers and landlords) has also changed rather dramatically as grain production takes place on larger and fewer farms. The profitability of operating a country elevator is directly related to the volume of grain the country elevator purchases over the course of a marketing year. Because the basic services offered by country elevators are very similar (purchasing, conditioning and storing grain), country elevators attempt to differentiate themselves from their competition by offering customers a variety of cash grain marketing tools. These tools range from the basic cash forward contracts to minimum price contracts to the so called 'new generation grain marketing contracts'. The primary focus of this paper is to determine the marketing contracts grain elevators offer to their customers and the extent to which these contracts are used by the elevator's customers. Additionally, the types grain contracts offered will be compared to the firm's storage capacity, business organization, size of customer base, geographic location and type of grain purchased

AGGUILD OF ILLINOIS: A NEW GENERATION COOPERATIVE WITHOUT THE BRICKS AND MORTAR

In response to low commodity prices and increasing production cost, agricultural producers have attempted to capture a portion of downstream market value of their products by organizing and investing in what are now called "New Generation Co-ops". These cooperative efforts often involve the construction of processing facilities (soybean crushing, corn processing, wheat milling) requiring an extensive capital commitment and a substantial financial risk for their members. An alternative strategy to the brick and mortar cooperatives are producer affiliations that involve the negotiation of contractual agreements with product users, providing protocols for maintaining quality standards, and collecting and sharing information. AgGuild of Illinois is an example of such a producer cooperative arrangement. The AgGuild, an alliance of some fifty central Illinois grain producers, attempts to capture a premium over the general commodity grain price by producing crops in viable quantities that meet the quality and attribute specifications desired by contracting users. To this point, the AgGuild has focused its efforts on producing non-genetically modified soybeans that have higher yields of isoflavones (a naturally occurring chemical compound in plants that are considered to provide a number of health benefits for consumers). The AgGuild attempts to capture a premium over the general commodity grain price by producing crops in viable quantities that meet the quality and attribute specifications desired by contracting users. To this point, the Guild has focused its efforts on producing non-genetically modified soybeans that have higher yields of isoflavones. This paper describes the operation of the AgGuild, assesses its current status and identifies some potential future challenges

AGGUILD OF ILLINOIS: A NEW GENERATION COOPERATIVE WITHOUT THE BRICKS AND MORTAR

In response to low commodity prices and increasing production cost, agricultural producers have attempted to capture a portion of downstream market value of their products by organizing and investing in what are now called "New Generation Co-ops". These cooperative efforts often involve the construction of processing facilities (soybean crushing, corn processing, wheat milling) requiring an extensive capital commitment and a substantial financial risk for their members. An alternative strategy to the brick and mortar cooperatives are producer affiliations that involve the negotiation of contractual agreements with product users, providing protocols for maintaining quality standards, and collecting and sharing information. AgGuild of Illinois is an example of such a producer cooperative arrangement. The AgGuild, an alliance of some fifty central Illinois grain producers, attempts to capture a premium over the general commodity grain price by producing crops in viable quantities that meet the quality and attribute specifications desired by contracting users. To this point, the AgGuild has focused its efforts on producing non-genetically modified soybeans that have higher yields of isoflavones (a naturally occurring chemical compound in plants that are considered to provide a number of health benefits for consumers). The AgGuild attempts to capture a premium over the general commodity grain price by producing crops in viable quantities that meet the quality and attribute specifications desired by contracting users. To this point, the Guild has focused its efforts on producing non-genetically modified soybeans that have higher yields of isoflavones. This paper describes the operation of the AgGuild, assesses its current status and identifies some potential future challenges.Agribusiness,