Correct me if I'm wrong here, but I always thought most small farmers (qtr section and less) were out of the futures market because they use 5000 bushel minimum increments. Have a bad harvest and you can't cover it.
Don't forget about storage costs at either elevator or farm. Farm storage has to be stayed on top of or bugs and moisture may ruin it. Then you are SOL.
Buying farm stored grain from someone else has problems as well since you don't know the moisture, weight, protein, and other problems causing dockage. It eventually has to be sold through an elevator and it may be a big shock to your profits when they dock it 10 or 20 cents a bushel cause of weeds or protein or low test weight or whatever.
Is that farmer going to store it and fumigate it for free? If it were me, I'd lock in the price the farmer gets by hauling it to the elevator and storing it there depending upon their storage costs which you have to build in. If he wants the money now then he pay the hauling. There is no downside for him because if he wanted to sell now to pay his bills he would have to pay the freight plus settle on what the elevator will pay after dockage. You should pay him no more. You get stuck with his possibly bad grain plus pay the freight for hauling later. Good deal for him.
Until the grain hits the scale at the elevator, you really have no way of knowing what his bushel count is anyway and you could end up getting shorted at a few bucks a bushel.
If you really have a bunch of cash you want to invest in grain, then buy it direct from the elevator and you know what you have.
I don't follow corn but around here but the basis for our elevator who has the monopoly has gone from 44 cents to 75 cents on wheat from KCBoT. Haven't checked it in a couple months though.
Let the buyer beware as there are a lot of risks. You may have to up the insurance on any forward contracted crops to protect you. More cost and less profit than you think.
Some of the bigger farmers around here with 50 thousand bushels and more to play with will forward contract some to lock in enough profits to cover costs of production.
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Today's Featured Article - Listening to Your Tractor - by Curtis Von Fange. Years ago there was a TV show about a talking car. Unless you are from another planet, physically or otherwise, I don’t think our internal combustion buddies will talk and tell us their problems. But, on the other hand, there is a secret language that our mechanical companions readily do speak. It is an interesting form of communication that involves all the senses of the listener. In this series we are going to investigate and learn the basic rudimentary skills of understanding this lingo.
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