There are some things you can control on your balance sheet, and some things you can't. You might not be able to control commodity prices, but you can choose the market you sell to.
That's the basis for several new crop marketing tools and services launched by the Farmers Business Network this year. At the 2017 Farmer2Farmer conference in Omaha, Neb., Charles Baron, FBN co-founder and vice president of product, outlined a few of these services.
• FBN Profit Center. It starts with the FBN Profit Center, which includes a dataset of buyers that gives the user real-time updates on quotes and bids every 15 minutes, Baron says. This tool also provides price alerts when a set trigger price in a local market is met.
• Grain marketing and pricing contracts. This year FBN launched grain marketing and pricing contracts services, which include the Freight on Board basis-offer service.
Most growers are limited to selling their grain to markets nearby. However, through FBN's FOB tool, growers can connect with a broader market.
FBN finds a market to meet a basis requested by the grower — even if the market is farther away than the grower would typically deliver. The network finds the most profitable opportunity within a range of about 300 miles. Once the most profitable option is found, an offer is made to the farmer, with no obligation to sell to that market. The farmer can deliver themselves, or use FBN's network to deliver.
"Our data showed us that 46% of the time better prices were available if you drive farther away, but most farmers lack the ability to do that," Baron says. "We can be a logistics service and help farmers take advantage of the price arbitrages that are in the market that they may not be able to capture because they're not monitoring prices constantly or they're not able to deliver to a certain point."
Other tools include Independent Hedge-to-Arrive (iHTAs) to lock in a futures price, like a normal HTA, but without getting locked into a single buyer's basis offer. Baron says this gives the farmer freedom to shop around for the best basis offer.
It also includes FBN's Deferred Futures Price contract, which lets the grower defer pricing on delivery, and wait to fix a final futures price at a later date and take advantage of potential rallies. In addition, FBN pays the farmer 70% of the cash price up front at delivery.
• Total Package production contracts. FBN also launched its Total Package production contracts for pulse crops like yellow field peas, lentils and garbanzo beans and identity-preserved crops, including non-GMO soybeans. Baron explains this tool was designed to help adjust farmers' working capital.
"If we can bring cash early and extend the financing period postharvest, then I can change the working capital on the farm, because they don't have to wait to get paid until after harvest, and they get cash on the crop early," he says. "It changes when the money moves out the door."
With Total Package contracts, farmers receive payments on crops within 10 business days of delivery. In addition, Baron adds growers have access to competitive input prices through FBN Direct. Growers also receive cash advances, which helps finance input costs.
"You get price security, you get a fixed price in the future, and you get cash up front — in some cases, up to 25% of the cash up front," Baron says. "At the end, when you deliver the grain, you get a fast payment."
• High-oleic contracts. Recently, FBN has partnered with Calyxt, a Minnesota-based biotech company that is developing non-GMO high oleic soybeans through gene editing.
These contracts come with a minimum of a 40-cent premium over the futures price at the Chicago Board of Trade for farmers growing at least 300 acres of these high-oleic soybeans. Contracts include delivery to locations in Brookings, S.D., or St. Lawrence, S.D., and Calyxt is committed to buying 100% of the crop.
Meanwhile, for farmers growing above 1,000 acres who sign up in time for an early-adopter program by Jan. 15, the premium can be as high as 90 cents over CBOT. Currently, Calyxt is offering these soybeans only in a relative maturity of 1.9 to suit the needs of the Upper Midwest and Northern Plains.
"Calyxt has the technology and the seed, and then FBN can provide the financing of the program and the contract of the program," Baron says. "That provides a full wrap for the farmer. So they know right from the get-go, here's my seed cost, here's my crop price, here's my input costs. If you can fix your costs and have your price move with your yield, then you have much more predictability in your cash flow."