Make Grain Marketing Easier With DPP

Northeast Iowa farmers now have latest online grain marketing tool with the Dynamic Pricing Platform. Rod Swoboda

Published on: Aug 1, 2006

Farmers who sell grain to AgVantage FS, Inc., a regional co-op in northeast Iowa, can now use a new online grain origination system called the Dynamic Pricing Platform or DPP. It's being offered at 15 delivery points, which include all of the firm's grain elevator locations.

AgVantage, headquartered at Waverly, started offering DPP earlier this summer. The platform was developed by Farms Technology LLC of Overland Park, Kan. The advantage of DPP is it lets farmers market grain anytime that's convenient for them. "With this state-of-the-art technology, the AgVantage grain department is essentially open for business 24 hours a day," says Jason Tatge, CEO of Farms Technology. "With the DPP watching farmers' target prices with every tick of the market, and with 24-hour access to grain markets and a multitude of delivery points, we're offering a new opportunity and convenience for farmers."

DPP watches the market

Here's how DPP works. Farmers login to the site with their computer at their farm to make, manage and monitor their offers to sell grain.

The system gives farmers the ability to do business with grain buyers 24 hours a day. They no longer have to be around a phone or get quotes to market their grain because the DPP is watching every tick of the markets for them.

Farmers set the price they want and the job of the DPP is to get them that price. When that price is achieved, DPP locks it in for them and they are mailed a contract. If that price is not achieved, the producer pays nothing.

AgVantage's launch of DPP coincides with implementing online access to farmer-customer's grain accounts. Farmers can look at their scale tickets with AgVantage in one window, then bring up another window with the DPP to set target prices for their grain in storage. This is all part of the co-op's dedication to provide grain customers with the best information and opportunities possible, says Steve Nitcher, Agvantage's grain controller.

Better prices for grain

The strategy is to provide customer service with the newest technology, positioning the co-op as a comprehensive source of grain marketing solutions for customers. AgVantage will use DPP for two primary purposes--to lock-in the futures component on Hedge To Arrive, or HTA ,futures orders and to lock-in target prices on cash offers.

Using the DPP to lock-in the futures component of an HTA leverages the power of the DPP to work for the farmer and the capability of AgVantage's merchandising staff to find the best cash markets. Farmers also have the opportunity to make offers on basis contracts and enter into average price contracts as well.

AgVantage officials were initially impressed by the DPP at a meeting last winter and decided it would be a great service for their grain farmer customers. "We allow the farmers to get their asking price on cash offers as soon as the futures price touches," says Nitcher.

Glen Foster, grain department manager, says, "We were drawn to the DPP because it allows our customers to do business with us 24 hours a day, and watches the markets for them when they can't. Once the farmer names their price, the DPP is watching the markets for them. If we can get them their price, the DPP will lock it in for them."

Fees are based on results

AgVantage FS Inc. went "live" with their DPP online Web site on June 1, and held a series of introductory meetings within their trade territory. The meetings were well-received by farmers, who were impressed by the DPP's ease of use, says Bill Strother, AgVantage grain merchandiser.

He is pleased with the interest of farmers, and is looking forward to using the DPP to assist them in getting a better price for their grain.

Lance Setterdahl, an AgVantage grain originator, sits down with farmers and "shows them the ropes". Farmers who use the DPP agree that whether they are busy on the farm or working their "day job" in town, DPP helps them lock-in the prices they know they need to be profitable, he says.

Another feature participating producers have found value in is in knowing their offer "is always being watched and doesn't slip behind the desk".

Most farmers are pleasantly surprised to find out the DPP is not only cost effective, but fees are based on results, says Setterdahl. Farmers pay 1 cent per bushel when their target price is reached, and only pay if that target price is reached. If you want to make an offer to sell corn for $3.00 per bushel and corn doesn't reach $3.00, there is no charge for use of the system.

Grain buyers, sellers both like DPP

In the past 6 months the number of DPP delivery points has doubled. This growth has been fueled by forward-thinking progressive grain buying firms like AgVantage FS, says Ted Hinton, director of marketing for Farms Technology.

AgVantage is only the second company in the eastern half of Iowa to offer the DPP to its customers, and joins an elite group of grain trading and processing firms across the nation. "AgVantage is taking its place beside some of the biggest names in the grain business because they understand the need to remain competitive," he says.

In the future, grain buyers who continue to position their customers as adversaries instead of partners are going to lose those customers, adds Hinton. DPP is enjoying an increasing acceptance by grain buyers.

"While it sounds counter-intuitive, we work to aid the grain buyers in protecting their margins, while giving their customers - the farmers - the best price," he explains. "Using this approach, we match the flat-price seller and the hedger using futures volatility, allowing both to get what they want."

Jason Tatge, CEO of Farms Technology says, "We're making tremendous strides as the growing list of DPP buyers demonstrates. As grain farmers become more demanding and astute in marketing, but have less time to spend watching markets, the value of our services increases. By meeting the needs of the farmer, our customers like AgVantage FS will continue to separate themselves from the firms that can not or will not adapt."

To learn more about DPP call your AgVantage representative, or visit the grain information page on the AgVantage site www.agvantagefs.com or the Farms Tech site www.farmstech.com.