Farming is a business. There are layers upon layers of intricacies that make up a typical day for a farmer. At the end of the day, there are too many details that could make sleeping at night difficult for him or her. A simple mistake could cost thousands of dollars. One farmer escaped potentially costly consequences by discovering one simple oversight. In order to understand how this farmer unearthed his error, it’s important to know a little background on how farmers conduct business with their elevators.
Farmers arrange contracts with their elevators. From these contracts, the farmer and elevator make an agreement on how much product the farmer will sell to the elevator, and at what prices. When creating these contracts, farmers look at the future and basis prices. Basis is found by subtracting the daily closing futures price of corn from the daily local cash price of corn. Simply put, basis is defined as the cash price minus the futures price. For farmers, basis is the fee the elevator takes. It’s their revenue stream.
The futures contract is when the farmer has agreed to sell a product at a future date, with the price and terms for delivery already set. By entering into this agreement with the farmer, the elevator has reduced their risk of having to pay a higher price. The farmer has agreed to sell their product at this price, even if the price of their product rises during the time to sell. It’s an agreement that holds both risks and rewards for either side.
From these futures and basis prices, the farmers lock in the contracts they would like to sell. Different times of the year will call for different contract prices. For example, in the summer the prices will be cheaper than they would be during harvest. The key to this strategy is to remember to lock in the contract, or else face the consequence of whatever bad deal you could potentially face.
Making The Save
During the summer of 2016, our team paid a visit to the Arthur Companies operating in Arthur, North Dakota. This visits purpose was to take part in the launch of the ArthurVu app that our Myriad Mobile team had developed. The ArthurVu app is now known as The Arthur Companies app. The functionalities of the app include real time scale tickets, cash bids, futures, pre pays, price laters, push notifications, and text messaging. Because of the way the Bushel platform has been built, farmers’ needs are intuitively built in. More specifically, because of our agriculture experience, we know what farmers need and what they do not. From these features, farmers are empowered to make better decisions with their data. While at the app launch on that summer day in 2016, a farmer was able to do just that.
At Arthur on this day, a farmer was able to recognize that he had created a contract that locked in the future price of his product––but not the basis. For this farmer, if he had not had the automated contracts feature of his ArthurVu app (what is now the Arthur Companies app), there’s a chance that unlocked contract would have gone unnoticed and costed that farmer thousands of dollars. Such a simple slip-up could have required a heavy price.
Making A Difference
That one lucky Arthur farmer has not been the only farmer finding value in the Bushel platform. Within 4 weeks of the Arthur Companies’ launch, an outstanding 75% of growers had adopted the app. From the real-time data, growers are finding the information to be almost addictive. They have been given the power to know exact details of their data that had never been known to them before. The Arthur farmer who caught his mistake is one of thousands of farmers across the U.S. and Canada that are making their best harvest yet thanks to the Bushel platform. Finding mistakes has never been so profitable.
Download your Arthur app today.