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Forward Contracting Program Expands Grain Company’s Business Reach
by Lynn Grooms

In 2003, Michlig AgriCenter, which operates three grain elevators and four retail facilities in north central Illinois, introduced a forward grain contracting program to help customers more proactively market grain.

The ProPricing program, developed by Cargill AgHorizons, also has enabled Michlig AgriCenter’s customers to take advantage of some risk management capabilities that the grain company previously did not have. “These include the Forward Fertilizer and Triple Play programs, both of which help producers hedge some of the price risk of fertilizer products by managing price volatility,” says Scott Stoller, grain merchandiser, Michlig AgriCenter.

The Michlig AgriCenter in Cambridge, Illinois, is one of the retailer’s four retail facilities in north central Illinois that is offering a forward grain contracting program to help growers more actively market grain.

With retail facilities in Cambridge, Franklin Grove, Manlius, and Walnut, Illinois; and a grain only facility in Sheffield, Illinois, Michlig AgriCenter offers fertilizer and other crop inputs as well as grain handling services, feed, crop insurance, Russell Consulting Risk Management, petroleum and trucking services. In recent years, it has worked with regional banks on behalf of its customers to develop financial “break-even” plans and return-on-investment formulas to help producers forward market their crops.

The risk-management tools developed by Cargill AgHorizons have enabled the Illinois company to move beyond a merely transactional relationship in terms of educating producers about the benefits of forward contracting, says Stoller. “These tools help producers segregate the marketing of their harvest in incremental steps, providing a more diversified, disciplined approach to portfolio management.”

Michlig AgriCenter’s customers were at first cautious about using these tools, but the response has been good since. “The ProPricing program has been especially popular, but I suspect that the other offerings, particularly Triple Play, will become more attractive as we determine how to bundle these offerings to other services and to the sale of their grain,” says Stoller.
The Cargill AgHorizons’ third-party licensing program has enabled Michlig AgriCenter to explore other business opportunities and relationships, says Stoller. “Today, we’re making forward sales in a market where we previously didn’t make deferred sales, and we expect that we’ll pursue other business opportunities given the relationships that have been established through expanding our offerings.”

Stoller adds, “It’s critical that we look at the larger picture in positioning our business. You cannot lose sight of the customer, and his/her profitability, if you’re going to survive in this market. While it’s important not to overwhelm your customers with different products, you want to be able to position your business as being armed with a full suite of offerings that can help them succeed in their farm business.”

For information about the ProPricing program and other grain marketing management tools, please contact Mike Etzel at Cargill AgHorizons, 952-742-1088.

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