Ray Loucks, president of IOM Grain LLC, sees a real possibility that less commodity grain and more grain with specific attributes for a variety of markets is in the future for farmers. He is involved in contracting with growers who grow varieties with specific traits for the food industry at a premium.
Today it is all GMO-free, although he sees the possibility that will change in the future once the food industry relaxes its concern over the issue. At that point, it will be far easier to develop varieties with additional traits for the industry, he says.
Jonathan Bryant, BASF Plant Science vice president of business management, says that one major question is whether the industry will see value segregation within the next few years. One possibility, he says, is that Iowa emerges as a high-starch corn market for the ethanol industry that producers are paid premiums for. “There could also be some geographical splits, with Illinois-Indiana specializes in grain with feed attributes for the Mid-South.”
New Tools for Producers
“There’s a lot of frustration by producers in marketing, a lot of volatility,” says Steve Crowe, Pioneer biofuels business manager. Particularly with overnight markets, he says, “nobody knows what the markets will do. Marketing is one of the toughest parts of production agriculture.”
A change made earlier this year is that farmers can use their smart phones to execute transactions. Presently, 5,000 farmers and 52 companies representing 344 different delivery locations are using DPP, says Jason Tatge, CEO of Farms Technology.
Small Market Crops
Frayne Olson, ag economist at North Dakota State University, looks to other small market crops such as sunflowers, malting barley, peas and dry edible beans as providing a road map for how specialty, value-added corn and soybean marketing systems could be created.
“I see that being applied to corn and soybeans as value-added markets are developed.” For high-starch corn destined for ethanol plants, for instance, Olson sees the possibility that corn which exceeds what the high-starch contract calls for to be paid a premium, not so if for some reason the grain does not deliver.
One issue that has developed for the food industry for soybeans grown in North Dakota’s Red River Valley, Olson says, and will likely develop for other crops, is standards of identity, a way for plants to link soybeans back to where they were grown. For some plants, being able to identify them as being grown in the Red River Valley is good enough, while other plants want to link soybeans back to the farm on which they were grown.
Changing Market Patterns
Chad Hart, ag economist at Iowa State University, says even though he looks for fewer crops to be marketed as commodities, he nonetheless expects half of the grain trade to remain a commodity business.
Hart says that if value-added demand becomes large enough, it could become its own marketing chain. That said, he does not expect value-added prices to become divorced from futures prices unless the markets become enormous, noting that has not even happened with ethanol, which now takes 40% of the U.S. corn crop. “There will be a premium paid for the variability, a two-tier pricing system,” he predicts.
“I see more specialty pricing. There will be more choices to make.” That, he says, will add a marketing dimension to seed selection. “It used to be just yield and production.”