Meet brothers, Chad and Ryan.
Chad and Ryan own a row crop farm in the upper Midwest that covers 2000 acres of land and operates under conventional farming practices.
Like their father and grandfather before them, Chad and Ryan use traditional grain marketing techniques. They have been bringing their harvested crops to the local grain elevator since they were boys riding shotgun on that dusty old Kenworth’s passenger seat. While traditional marketing has at times proven effective in the past, and as the brothers take over the farm, they begin to understand that this method of grain marketing isn’t always able to help them make ends meet.
Corn basis at their local elevator is currently -$0.65 cents under the $3.89 December futures price. That means for every bushel of corn Chad and Ryan sell to their elevator, they receive $3.24. While futures are posted by the Chicago Board of Trade, and basis is controlled by the elevator, the brothers have little say in the cash price they receive for the crop they’ve spent 8 months fertilizing, cultivating, and nurturing. They’ve spent a back-breaking number of hours working on machinery in the shop, and that John Deere tractor cab is like a second home to them. If that isn’t enough, they’ve spent an equal number of hours lying sleepless in their beds at night due to the current state of the farm economy.
The farm economy is shaken right now, and at times feels shattered. As commodity prices continue their dismal decline; land, rent, seed, fertilizer, and other input costs are all peaking. According to “Estimated Costs of Crop Production in Iowa – 2017” as found on the Iowa State.edu website, the estimated cost to raise an acre of corn following a standard soybean rotation is $631.18 per acre, or $3.51 per bushel. If you’re following along and doing the math, that means that holding everything else constant, the brothers are losing $.27 per bushel or $48.60 dollars per acre in their efforts to feed a growing global population.
There is a technological disconnect in agriculture right now. On-farm technology, seed engineering, and precision agriculture have done their part as we see national corn yields rise to 174.6 bushels per acre, making it yet another record year for the brothers. On top of that 15,148,038,000 bushels of corn were harvested in 2016. These technological breakthroughs, while astonishing, have increased U.S. corn supplies to 2,210,000,000 bushels, and have kept futures prices suppressed. In an effort to ride out low prices, farmers like Chad and Ryan are storing grain where ever they find the space. They are building new bins, utilizing old buildings, piling grain on the ground, storing corn in bags, and finding new and out of the ordinary methods to protect as much of their investment as possible.
As the technology treadmill spins, only the farms that have the endurance (capital) can go the distance. This means that as time goes on, if our current conditions persist, Chad and Ryan will be unable to support themselves and their families. The small to medium sized family farm will fall off the back of the treadmill, and large corporate farming conglomerates will be the only ones running. The model of the technology treadmill is simple. In our current state, as we recognize that the future of farming is indeed here, we also begin to understand that the brothers need to acquire more acres, to plant more corn in an effort to turn more profit. This also means that Chad and Ryan need to pay more hands to operate more equipment to harvest more acreage. Not easy to do when you’re making less money…
It’s time to reward and empower the men and women who make a living by feeding the world, and it’s time redistribute the fruits of their labor. The voices of farmers have not gone unheard, and Grainster is here to answer their call.
Grainster is here to balance that technological disconnect by giving farmers like Chad and Ryan a new resource. This new resource exploits our current speculator driven pricing model; a model that is effective not efficient, price inflative, illiquid, high-risk, and resists innovation and development. The new model brings market driven verticals that will prove to be effective, priced to market, responsive, resilient, transparent, liquid, low-risk, flexible, and most importantly – customer driven.
No longer will we have unneeded hands in the supply chain. From dealers and brokers, to elevators and exporters, to processors and end users. Each of these hands take margin directly from the brothers’ pockets. In a world of chaos where people are turning their backs to each other, Grainster is opening their doors to the world. Their commitment is one of virtue and authenticity that brings food from two brothers’ farm in Minnesota, to a grocery store in India. Grainster is here to prove that while an industry that we love may be shaken, it is certainly not shattered.