With the competition heating up among farmers trying to sell their grain, and also among the elevators trying to buy it, relationship building between buyers and sellers has never been more important to business success for grain and oilseed producers.
It’s why dropping in to say a friendly hello every few months is no longer enough. Today’s elevator relationships take a lot more finessing.
If that sounds like something you don’t want to do, just be forewarned that your neighbours are already several miles down this road.
“As farmers become bigger and bigger, they’re spending more time on marketing, and definitely spending a lot more time on building relationships with end-users and various grain companies throughout the province,” agrees Richard Smibert, president of Ontario’s London Agricultural Commodities Inc.
The competition is fierce across the country. On the Prairies, says Wynard, Sask. producer Norm Hall, the days of a grain elevator every few miles, or multiple elevators in an average community are long gone. Also consigned to the past are over 100,000 small operations in his province. There were just fewer than 37,000 farms in Saskatchewan in 2011, but their scale is now immense.
“Instead of the 1,500-acre farmer versus the 500, it’s now the 15,000-acre versus the 5,000,” says Hall.
The grain trade is still built on a handshake and a lot of trust. In fact, with such tight margins in the industry, many elevators have more riding on trust today than ever before.
It’s why they want to do business with farmers they know, and why they’re looking for forthright operators who will provide a good sample and deliver exactly what they’ve said they will.
“If you say you’ve got this quality and you deliver something else, you’re not going to be on that list,” says Hall. “Once is a mistake, but two or three times in a row and you quickly go off that preferred list.”
Elevators are looking for sound farm management practices. They want producers who grow good clean crops that are high quality and contamination-free, Smibert says.
In return, farmers who come through stand to benefit.
“We do some contracting of food grade soybeans here in the province, and we have certain growers that we call first because we know they do a good job — they grow good-quality grain,” says Smibert. “Well-managed farms and the producers that take the extra steps to do a really good job likely receive higher yields and higher premiums for their product.”
You’re only as good as your reputation, and a high standing can put a farmer up the list of people the elevator calls, giving them a better chance of moving their crop even in tough years.
“I need your help here, but I can help you out somewhere else down the way,” explains Dan Mazier, who farms near Brandon, Man. “That elevator company’s got to fill up a train, and if you’re the guy that has that grain and quality, you might get your contract in. But you helped them out on one side and usually they do remember you.”
If a company has a shipment that needs to be made and orders to fill, they’ll text and email producers. If they’re in desperate need, they’ll put on a special price, and those first in line will get it.
“But if there’s a real special on, you will get a phone call. And that’s the preferential treatment,” says Hall. “Once you have that relationship, then they will work with you on maybe a better price.”
That’s especially true if you have what they need.
“In a low protein year, if you have high protein, and you’re on their list, you’ll get the phone call,” says Hall. “There’s times when other qualities don’t matter. If you’ve got a No. 2 high-protein (wheat), and they’re shipping a train load of No. 1 and they need to bump that protein up in the grain they already have, it doesn’t matter if yours is a No. 2, you’ll get a No. 1 and high protein (price) for it.”
It’s never a bad idea to keep in touch with the elevators.
“We get calls from producers at different times telling us what they have, what they see for grades and quality in the bin. And if there are markets that we’re looking for something specifically, we’ll know who to call right away,” says Smibert.
Mazier says there’s a lot of fishing done by farmers and elevators throughout the year.
“It’s not too bad an idea to every couple weeks talk to your grain buyer, see what’s going on with the markets. Even though you’re reading the emails, etc., you can’t beat the conversation, hear what’s coming up. And they’re always probing too, how the crops are growing. They’re tapping our shoulders to make sure they’re in touch with us too, because they’re trying to plan out for the next 365 days right now,” Mazier says.
There’s more communication between producers and elevators than ever in the past, in no small part due to technology.
“With the Internet, documents can be sent back and forth very easily; with text messages, you can shoot messages out to the producer when he’s in the field with his smartphone,” Smibert says.
“There’s definitely more coming from the elevators because if you’ve got an email or text, they’re shooting out messages every day,” Hall notes. “And if you’re dealing with a few like I am, your phone’s ringing all the time.”
What can you ask for?
Grain companies are also taking more time and investing more in the effort to cultivate relationships with the farmers they want to deal with.
“Many have teams dedicated to this and they spend a lot of time working with their country staff to ensure as consistent and as customer-responsive an approach as they can,” says Wade Sobkowich, executive director of the Western Grain Elevator Association. “The grain companies operate in a competitive environment, and to do otherwise would be to risk losing that producer to a competitor.”
“I think it’s probably more important now than ever,” adds Smibert. “You definitely have to be out talking to those producers on a regular basis and making sure they’re aware of what’s going on in the marketplace and letting them know what’s available.
“If you don’t get out there and talk to producers, there’s a good chance one of your competitors is. There’s a chance they will get the business if you don’t do it,” says Smibert.
While farmers will shop around for the best price, elevators can offer myriad other benefits to attract their business, Sobkowich says. That can include contract options and ways to mitigate risk, and they can also include financing, plus more efficient ways of doing business, with e-services becoming increasingly important, Sobkowich points out.
Ancillary services such as trucking are also getting included in the value calculation that grain companies will offer.
“I’ve gotten calls over the years that they’re short, they know I have the grain in the bin, and ‘can you bring it over or can we send a truck over to finish it up?’” says Mazier.
Of course, relationship building can cut both ways, and this is a particularly bad time for an elevator to have a bad rep.
When farmers feel burned by an elevator, they’ll hesitate to have further dealings with them, Hall says. Conversely, a farmer with a good relationship with a particular elevator is more likely to want to sign more deals.
“If that means going a few more miles, you’re compensated for the other side because it’s just a better place to deal with,” Mazier says. “It’s no different than if you want to go to your local Superstore or you want to go across town to Costco: It’s wherever you see the value you feel good with.”
“For many producers it comes down to the relationship and trust with the local elevator manager/agent, all other things being equal,” Sobkowich says. “The relationship both ways is important. Companies tend to go the extra mile for those that can deliver on a moment’s notice, deliver in all conditions, and consistently deliver the quality that was contracted.”
The grain industry can enhance its reputation when it steps in during a crisis, like when Triffid was found in flax, or a frost wipes out a crop, Mazier says.
A late May frost last year wiped out canola in a wide swath of southern Manitoba, and the industry reacted immediately.
“There was a million acres gone in Manitoba alone for canola. And the seed companies, their input suppliers stepped up. They were out going to Alberta picking up seed the next morning after the frost… In two days they had the seed in Manitoba; within a week it was already sown,” Mazier says.
“Whether you’re dealing with the chem dealer, fuel dealer or whoever, it’s all about the cultivated relationship that you have,” Hall adds.
It’s when expectations aren’t met that Mazier, as president of Keystone Agricultural Producers, gets a lot of calls, either from farmers or elevators.
And when the system breaks down because not everyone was involved in the decision-making — like the western rail transportation woes of 2013-14, or this year’s sudden closure of the Port of Churchill — that trust is tested and bad feelings emerge, Mazier says.