Buy low, sell high. That is always the ideal scenario. Traditionally that is what your investment advisors and accountants tell you. But, if you’re dealing with grain, things operate a little differently. In fact, in the case of grain elevators, ethanol plants, feed grinders, and more it’s not all about the purchase price. Rather, it’s about managing basis.
Many agribusiness professionals are familiar with basis. It’s what we refer to as the difference between the quoted market price on the Chicago Mercantile Exchange (Chicago) and the local market price. In taking a closer look at grain, it’s rare that you will sell grain at your local elevator for the same price quoted in Chicago. Often you will be paid less, but, possibly more. It all depends on local supply and demand. The whole process can cause some head scratching — how is it that you can buy high, sell low, and still make money?… Continue readingRead More »