Monday, September 12, 2016

Decision Tools for Hauling Grain to Market

Jordan Shockley, Farm Management Specialist, University of Kentucky

Harvest season is upon us and while transporting grain to the market may be the last input cost in the production of grain it is a critical decision a producer has to make, especially when margins are thin. Determining which market to sell your grain (if you have options) can be a complex decision. Most producers, especially in Western Kentucky, have multiple potential markets to deliver their grain. This leads to the question of, “Should I sell my grain to the closest elevator or should I transport it a further distance to an elevator offering a higher price?” What market you choose not only will determine the price you receive but will also determine the cost associated with transportation. The market that provides the highest price is not always the most profitable price. The trade-off between maximizing price per bushel received from the buyer and minimizing transportation costs could be the difference between making a profit that year or being in the red. 

There are many factors that will impact the transportation cost of grain and determine the most profitable option. Those factors include: grain price, distance, fuel price, wait time, quality discounts, labor, and truck capacity. It is common for most producers to make their market decision based on only one of these factors. However, all of these factors need to be considered simultaneously when determining the most profitable market option. To aid in this decision, a Microsoft Excel tool has been developed to help producers choose what buyer to sell their grain to based on the factors listed above. By entering the required inputs into the tool, the estimated hauling cost and net grain price received is calculated for each buyer (up to 6 buyers) and the buyer with the greatest net price is determined. In addition, the discount schedules for each buyer are determined based on moisture levels and the buyer’s discount method. A Google Map was also created which identifies the grain markets for Kentucky producers. Both tools can be found at the website below titled “Grain Hauling Decision Guide” and “Kentucky Grain Markets Map”.

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