(Podcast) Episode 025: Overview of 2017/18 Grain Elevators Markets

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Anton chats with Dr. Will Secor, an economist CoBank’s Knowledge Exchange unit. Dr. Secor received his PhD in applied economics from University of Minnesota and has focused on understanding dynamics within the food supply chain. He has recently written a report (find the full report here) about the market dynamics within the grain elevator landscape. Storage returns are high, basis are low, and transportation costs are near historical cost levels. This creates a positive outlook for grain elevators across the major commodity producing regions. But what’s going on underneath the hood that causing these conditions?

Highlights:

2:30  What are the basic components that impact grain elevators’ profit margins?

3:35  What is the “carry” in futures markets and how does that carry inform us about costs of storage?

4:45  Basis are low. How does this impact grain elevators’ profitability?

6:00  Transportation costs of grain are crucial to profitability. What are the three main transportation modes and what are the price dynamics for those modes?

6:35  How are barge rates on the Mississippi River affect elevators’ costs in the Great Plains states?

8:35  What is a secondary rail market? 

10:15  What has been happening to secondary rail prices? How does that impact elevator profitability?

13:45  What’s the state of trucking prices and other issues in the trucking market? 

16:30  Diving a bit deeper, do elevators that market different grains differentially affected by what’s happening in the current market?

21:20  How are current international trade and geopolitical uncertainties playing a role? Or are they?

23:45  What about elevator size? Do small elevators or large elevators have more advantage in the current market?

25:45  What do you see happening in the future? What factors should we pay attention to in order to gauge when and how much this market may change?

(Intro and outro music by Trevor Sensor)

(Photo by Ronald (Ron) Douglas Frazier is licensed under CC BY 4.0)

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About Author

Dr. Anton Bekkerman is an associate professor in the Department of Agricultural Economics and Economics at Montana State University, joining the faculty in 2009 after completing his PhD at North Carolina State University. Bekkerman's primary areas of research are grain marketing, basis and price forecast modeling, understanding how grain prices are affected by changes in supply chain infrastructures and quality demands, and analyzing the economic trade-offs of adopting alternative dryland cropping systems in Montana. One of his current projects is an investigation of how new grain loading technologies are affecting prices that Montana farmers receive for their wheat. Bekkerman is also examining the economic impacts that Montana's rapidly expanding dry pulse industry will have on the state's crop industry. Although Bekkerman grew up on the east coast, he has recently made a small step toward production agricultural after acquiring three backyard chickens.

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