Grain Marketing Tools: A Survey of Illinois Grain Elevators

As with most sectors of the agriculture economy, the U. S. country grain elevator industry has experienced considerable consolidation and concentration. By the same token, the country elevator's customer base (grain producers and landlords) has also changed rather dramatically as grain production takes place on larger and fewer farms. The profitability of operating a country elevator is directly related to the volume of grain the country elevator purchases over the course of a marketing year. Because the basic services offered by country elevators are very similar (purchasing, conditioning and storing grain), country elevators attempt to differentiate themselves from their competition by offering customers a variety of cash grain marketing tools. These tools range from the basic cash forward contracts to minimum price contracts to the so called 'new generation grain marketing contracts'. The primary focus of this paper is to determine the marketing contracts grain elevators offer to their customers and the extent to which these contracts are used by the elevator's customers. Additionally, the types grain contracts offered will be compared to the firm's storage capacity, business organization, size of customer base, geographic location and type of grain purchased.