Farm-to-terminal contracts elevate grain marketing

The complexities involved in grain marketing can frustrate or intimidate even the most seasoned farmer.

There’s a ton of information to sift through. Ever-changing crop prices to monitor. Multiple contract types to consider. Global volatility and production uncertainty to make decisions more stressful.

MFA simplifies these challenges with comprehensive resources and expert guidance to help producers capture increased value and manage risk when marketing their grain.

“We want our producers to be as profitable as possible. That’s the ultimate goal,” said Eric Williams, senior director of MFA Grain Operations. “We’re involved in every aspect of their crop production—seed, fertilizer, chemicals, farm supplies—so it stands to reason we would want to see them make more money from the crop they produce in the end. We have the people and tools to do just that.”

Those tools range from simple to sophisticated, whether it’s a traditional cash price contract or alternatives that take a deeper understanding of grain-marketing strategies, such as deferred payment, accumulator, open basis or futures-only contracts. Each comes with its own set of benefits for producers as well as various levels of risk security, pricing flexibility and cash flow.

Regardless of the choice—or combination of choices—MFA can help growers maximize those opportunities with its expansive network and flexible marketing options, said Grain Originator Nathan Oglesby, who is based in Glasgow, Mo., and serves MFA’s Heart of Missouri and Trails groups.

“We have so many different avenues to help our farmers market grain,” he said. “It all boils down to what they’re looking for. They just have to understand what’s associated with each style of contract, what their price goals are and how much risk they’re willing to take.”
Clayton Deis, who raises corn, soybeans and wheat between Gilliam and Glasgow, Mo., regularly markets grain with MFA and works closely with Oglesby to develop market strategies and take advantage of pricing opportunities when they arise.

“I’ve got enough grain bins to store about 50,000 bushels, and that gives me capabilities to sell throughout the year,” Deis said. “Nathan keeps me informed about good marketing opportunities and answers my questions. He’s always been helpful in bringing me new ideas.”

One of those ideas was to try “farm-to-terminal” contracts, which have become a popular option for MFA grain customers in certain areas. This type of contract allows growers to sell their grain through MFA but deliver it directly to the buyer, such as a feed mill, ethanol plant, exporter or processing facility. Growers can haul the grain themselves if they have the equipment, or MFA can arrange to have it picked up from the farm.

“We’re always looking for ways we can add value for producers,” Williams said. “Farm-to-terminal is one of those ways.”

Often, this option allows the grower to capture a premium for their grain while also receiving the benefits of selling through MFA, namely the Domestic Production Activities Deduction (DPAD), which is unique to cooperative businesses. DPAD is intended to provide tax advantages to companies that manufacture, mine or produce products in the United States. Agricultural cooperatives are allowed to treat products—such as grain—produced by their members as manufacturing activities for purposes of this deduction.

Though not guaranteed every year, DPAD may be returned from MFA to eligible customers based on their grain sales to deduct from their income taxes.
“I’ve been doing the farm-to-terminal contracts for probably four years now, delivering to Cargill in California, Tyson in Dresden and JBS in Smithton,” Deis said. “A lot of times, there’s a premium over a local price, and I’ve also gotten the DPAD tax break at end of the year. It’s worked well for me.”

An advantage for MFA is that those bushels never hit a local elevator, allowing the company to handle additional grain volume without having to increase physical capacity. Williams said growth in MFA Incorporated’s grain sales over the past few years can be attributed in part to increased interest in this marketing option.

“The farm-to-terminal contract is a great way for MFA and the producer to work together on moving grain,” Oglesby said. “We basically just do the paperwork, and the grain never comes into any of our facilities. When discussing these contracts, we tell farmers that we’re not in competition with them selling grain into these terminals. We’re selling our positions and doing our best to allow the farmers to benefit from our ability to market grain for the most profitability.”

With continually changing market conditions, communication is key when it comes to assisting grain producers in better understanding, selecting and using the various grain contracts, Oglesby said. Trust is crucial, he emphasized, because their livelihood is at stake.

“I do my best to educate the producers I’m working with,” Oglesby said. “I will never tell somebody to do something that I don’t believe is the right thing to do.”

Deis said it’s that conviction and commitment that keep him returning to MFA to market his grain.

“I’ve worked with Nathan for the past 15 years, and I trust him 100%,” Deis said. “Through MFA, he has an endless amount of resources, places to sell grain and marketing options. And his knowledge of it all is great. It’s nice to have somebody like that in your corner.”

For more information on MFA’s grain-marketing services, contact your local MFA representative or Agri Services Center. Farm-to-terminal contracts may not be available in all areas, but MFA’s grain personnel can help determine the best marketing strategies for each situation.

“Having that person to talk to—someone focused on grain, knowledgeable about marketing and looking at it from the local level—makes an impact,” Williams said. “It can be daunting task to talk with producers who are already marketing at a particular place and convince them we can add value, but I think the proof is in the pudding.”