United Bio Energy Offers Online Cash Grain Pricing Platform

East Kansas Agri-Energy is the first ethanol plant to launch the Dynamic Pricing Platform. Compiled by staff

Published on: Nov 9, 2005

Farms Technology's Dynamic Pricing Platform, an online grain procurement application, is now available at select United Bio Energy locations, beginning immediately with East Kansas Agri-Energy in Garnett.

The DPP gives producers the ability to create, manage and monitor target priced cash grain offers that are evaluated in real-time with every tick of the futures market. Growers no longer need to be by a phone to call their local buyer at the right time on the right day to get the best prices. In addition to target offers, a variety of online marketing tools are available around-the-clock. These include: average pricing contracts, futures fixed contracts, basis contracts along with historical cash pricing data, cash bid sheets, and local buyer commentaries.

The ethanol industry is expanding the domestic cash grain markets and changing traditional grain movements. "Progressive buyers, like EKAE, who see value in offering corn and grain sorghum growers the ability to service themselves in a 24-7 format, are using the Internet and the DPP to offer additional levels of cost-effective customer service," says Farms Technology, LLC, CEO Jason Tatge. "Progressive growers are seeking out new markets. If they don't yet have the ability to sell their cash grain online to local buyers, they're asking them to add that capability. The DPP has expanded rapidly because many growers are requesting the service from local grain buyers."

Ron Hansen, vice president of United Bio Energy Management, Wichita, KS says after listening to their ethanol plant partners and their corn suppliers, DPP technology allows both sides of the supply chain with a way to service more customers in a cost-effective manner. "Our suppliers can offer us their grain at the cash price they choose, and really put the power of the market to work for them online at anytime, day or night, when it's most convenient," Hansen says.

Tatge explains that the DPP gives approved sellers the opportunity to conduct business online and take advantage of intra-day market rallies. Traditional Web sites, before the DPP, show stale cash prices that are 'subject to change without notice.' The DPP will monitor all sellers' offers with every tick of the board and change in basis. When the market reaches the seller's desired target price level the DPP automatically executes the transaction(s) for them.

There are roughly 15 billion bushels of corn, soybeans and wheat in the U.S. that need to be marketed annually, from the farm to the first buyer, regardless of price. Currently 99.9% of that business is done over the phone during normal business hours. The phone works well between 8:30 am and 4:30 pm, as long as buyers have enough people to answer it and are able to execute transactions. Statistics show that each year, on average, more than 50% of all cash grain is sold during the 20 or so random days when the futures markets are most volatile. The problem for grain buyers is knowing when these 20 days will occur, and being able to staff up accordingly.

UBE believes there is increasing interest from growers' in marketing grain online. The DPP will allow them to gain a competitive advantage over those buyers who choose to rely on the phone and traditional business hours to service their customers.

"Surprisingly, the majority of offers we receive are placed between the hours of
7:00 pm to 7:00 am when traditional grain buyers are not in the office," Tatge concludes.

Since 2001, corn and soybean producers have been using Farms Technology's patent-pending DPP online to sell cash commodities to Bunge, CHS Inc., and Jennie-O Turkey Store, a subsidiary of Hormel.

The DPP and Farms Technology, LLC are an independent neutral party who monitor offers on behalf of both the buyer and seller. The inherent conflict of interest between buyer and seller can be eliminated by making buyers marketing allies not the traditional marketing adversaries. One cent per bushel, just a penny, is the cost for use of the DPP online cash grain trading platform.

"This small fee is paid by the buyer and in many cases passed on to the seller. Many other marketing services/products charge several cents per bushel to the seller. They usually split the producer's transaction fees between the marketing service and the local buyer. I don't see how that type of transaction helps the producer. We just want to be above-board with everyone involved." Tatge adds.

Producers can learn more about online cash grain sales opportunities using the DPP service at www.farmstech.com, or by directly contacting East Kansas Agri-Energy grain buyer Tom Wapp at (316) 616-3558.