Big River Resources, an ethanol plant at West Burlington in southeast Iowa, on Feb. 15 launched the Dynamic Pricing Platform for farmers in southeast Iowa and western Illinois. Farms Technology LLC of Overland Park, Kan. and Big River Resources, announced the availability of the DPP, which is a patent pending, online grain procurement system.

The DPP gives farmers 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. Farmers 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 and information are available around-the-clock. These include: futures fixed offers, basis offers along with historical cash pricing data, cash bid sheets, and local buyer commentaries.

Merlin Miller, a farmer from Fairfield, says "Using the DPP gives me the opportunity to get a target price that otherwise would only be available by being on the phone at the exact time the market reaches it. It saves me time watching the market, and I can make offers based on news or reports that become available anytime of day or night that I need to." 

More ethanol plants are offering online grain buying as an option.

Jason Tatge, CEO of Farms Technology, says, "Iowa and Illinois cash grain markets along the Mississippi River are changing rapidly."

Cash prices are calculated by taking a futures price from the Chicago Board of Trade and the adding or subtracting the local delivery market's basis level. Farmers and buyers have traditionally spoken two different languages. The farmer is primarily concerned with the price on the check from the local buyer after the grain is delivered (cash price). The buyer is concerned with buying a certain basis level and being able to get that grain hedged.

"The DPP allows both parties to speak in their own terms, while using the futures market volatility to dynamically create a match," says Tatge. "Buyers are able to get their basis levels secured and farmers get their asking prices because the DPP can monitor every offer with every fluctuation of futures prices. More farmers are finding out how easy it is to get better prices using the DPP. It's no longer a question of 'if' the DPP will become a powerful online tool for cash grain marketing, but rather a question of 'when' it will be available in local markets."

Tatge notes growth in DPP use has come from innovative participants. Buyers like Big River Resources are listening to their suppliers and see value in offering corn growers the ability to transact business in a 24-7 format, using the Internet and the DPP to offer additional levels of cost-effective customer service and transaction execution.

Tatge says, "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.

"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," he explains.

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, says Tatge.

Cost is a penny per bushel

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 some 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," saysTatge.

Big River Resources grain merchandiser Jim Hansen says, "The DPP gives our customers the opportunity to put firm cash offers on our Web site at any time whether we're open, or not. It can be a real convenience for them. And, they can monitor our cash bids without having to pick up the phone and call anyone. Some customers really like that. And, during the day they can also see the cash bids changing. However, they don't have to be there to have their bid filled. If our cash bid meets their offer, the sale's confirmed.

"The biggest benefit to me as a buyer is the convenience of seeing confirmed orders pop up on my computer screen when they have filled. I don't have to do something right away. I know they've gotten filled. Once we get the night trading session on our system it will be an even bigger convenience.

"When the DPP first came on there were quite a few sign-ups. We've already had a few sales and the promotional literature hasn't even finished mailing, yet. I'd imagine things will pick up when more farmers hear about it," Hansen concludes.

Both buyers and sellers benefit

Buyers and sellers both benefit from online cash grain sales. Currently 99.9% of grain is purchased 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.

Technology is helping reduce the high costs associated with the traditional grain procurement process. There are roughly 16 billion bushels of corn, soybeans and wheat in the United States that need to be marketed annually, from the farm to the first buyer, regardless of price.

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. The DPP helps solve this problem.

Tatge says, "Traditional grain buyers are not in the office between 7 p.m. and 7 a.m., and that's when the majority of offers received on the DPP. That's when traditional grain buyers are not in the office, so it's an excellent compliment to traditional grain buying systems."

Since 2003, corn and soybean producers have been using Farms Technology's patent-pending DPP online to sell cash commodities to major grain companies, including CHS Inc., Jennie-O Turkey Store, a subsidiary of Hormel, and more. Visit www.farmstech.com for a current list of companies using the DPP to originate local cash grain. Producers and other suppliers can learn more about online cash grain sales opportunities using the DPP service at www.farmstech.com, or by directly contacting Big River Resources grain merchandiser Jim Hansen at (800) 463-9850, Ext 2.