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Feed growers tout benefit of selling directly to end users

Published on April 25, 2013 3:01AM

Last changed on May 23, 2013 8:50AM


Capital Press

SODA SPRINGS, Idaho -- Sid Cellan estimates he's made an extra 40 cents per hundredweight, adding up to roughly $20,000 per year, since he started cutting out the middle man two seasons ago.

Rather than going through the local grain elevator to find a market for his feed grain -- and to provide protection against the risk of not being paid -- the Caribou County dry-land grower now sells most of it directly to a Utah dairy.

Eastern Idaho grain farmers say selling feed directly to an end user can result in a considerable payoff, but it's critical to know the buyer well and to take steps to reduce risk.

Cellan's father once lost $100,000 by selling directly to a dairy that declared bankruptcy. Cellan's family learned feed suppliers tend to be at the "bottom of the totem pole" among creditors.

Cellan, one of three Caribou County growers now supplying the Utah dairy, has a contract to sell 90,000 bushels of grain over the course of a year. Without a grain elevator for shipping, they hire an independent transportation service.

The Utah dairy doesn't pay into an indemnity fund, which would compensate farmers who provide feed in case of default. So Cellan requires payment every month to minimize potential losses.

In addition to mitigating risk, Willis Seyfried, an operator with Soda Springs Grain Elevator, said elevators also serve as storage warehouses for growers.

Even Cellan uses the elevator to find specific seed varieties, or to have his own seed treated, sorted and cleaned. Seyfried said handling fees are deducted from strong prices, resulting from the elevator's sales volume of roughly 1.5 million bushels per year.

Jeff Godfrey, president of Caribou County Grain Growers, occasionally directly supplies a local egg company about 20,000 bushels of soft white wheat for feed.

"One day I picked up the phone and checked with them to see what they were paying for feed wheat," Godfrey said.

He said the egg company is fairly large and secure, and he estimates it costs him at least 25 cents per hundredweight to sell through the local elevator. Godfrey said direct sales may not be feasible for growers without their own transportation or storage.

"It's something you can look around and find and you might use one year, and the next year you might not," Godfrey said of direct sales.

Arbon Valley, Idaho, grower Hans Hayden sells some grain directly to households for home storage and about 5 percent of his production as seed to "best-friend neighbors." He doesn't often go through a grain elevator, but he sells large volumes to mills, reasoning he has his own transportation to move his grain, and the mills have indemnity fund protection.

Hayden said it's tough to avoid selling hay directly to an end user and advises growers to work with dairies and feed lots that pay into the indemnity fund. He requires hay buyers to pay 80-90 percent up front, and the rest after it's delivered and weighed.

He warns feed growers to know their customers, as some buyers seeking hay have burned bridges by failing to pay previous suppliers.


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