Some farmers selling to the U.S. prefer to use a broker, others go it alone. Try these tips to help with both of these approaches
Whether you choose to go with an established grain broker or try to sell direct to a U.S. buyer, there are a few things it’s probably best to know in advance as you develop a successful marketing strategy for your wheat and barley.
3 basic tips
First, a few basic tips for farmers considering selling grain into the U.S.:
1. Export licenses are no longer needed to export wheat, durum or barley from Canada.
2. It’s a good idea to call the U.S. delivery point or elevator company in advance, to get the necessary information to conclude a commercial transaction.
3. Information about importing agricultural products into the U.S., including allowable pesticide residues, food labeling and standards, sanitary and phytosanitary requirements, acceptable food additives, and certification and testing requirements can be found at the U.S. Department of Agriculture’s (USDA’s) Foreign Agricultural Survey website.
If you’ve decided not to use a broker, here are some basic tips to help you cut through the red tape on your own.
1. Some sources of contact information for U.S. grain elevators include state websites, trade association websites, private company websites, telephone and local business directories.
2. Most U.S. states require grain buyers to be licensed. Each state licensing authority maintains lists of licensed businesses. These state authorities can be an excellent source of information.
3. U.S. grain buyers are either privately owned companies or farmer-owned cooperatives.
4. A local grain broker is a good place to start if you want current price information, but there are also other sources. Many U.S. state websites and commodity advisory services also provide price indicators. It really pays to do some research and shop around to get an idea of where you can get the best price.
5. If you’re selling grain to a U.S. facility you should always obtain and confirm the actual, contractible price directly from the grain company. In many cases grain company websites display current price indications, but these are not necessarily the actual prices paid or contracted.
Generally, anyone who deals in or handles grain grown in Western Canada must be licensed by the Canadian Grain Commission (CGC). There are five different classes of licences. Most grain brokers will have a grain dealer’s licence which allows them to carry on business as a grain dealer, defined as a “person, who for reward, on their own behalf or on behalf of another person, deals in or handles western grain.” For more details on licensing and exemptions check out the CGC website. It also lists companies licensed by the CGC to deal or handle grain.
“Each country has their own set of rules and regulations that brokers need to follow. And every grain broker brings their own set of skills and attributes to the table,” says Bobby Leavins of Rayglen Commodities Inc. at Saskatoon. “Brokers usually don’t own a lot of hard assets so they have to perform for both buyers and sellers on every trade, otherwise they take their business elsewhere.”
Choosing a grain broker
When choosing a grain broker, the first thing to make sure of is that the company has knowledgeable people on staff who fully understand the farming industry.
“Almost all our grain merchants grew up on a farm or are still actively involved in their family’s operation, so they know the highs and lows that can be experienced within the industry,” says Leavins. “They are well-educated and highly motivated.”
Some farmers may be having success selling their cereal grains directly into the U.S., but most are looking for someone who can assist them to make those trades.
Brokers keep abreast of what is happening in the industry. “Our staff talks to dozens of cash buyers as well as trend and technical traders every day,” says Leavins. “They help us understand what has happened previously in the market, where it is at and hopefully some direction on where it is going.”
A good broker will also perform due diligence to make sure you will be selling your grain to someone reputable. “With grain buyers, our criteria includes a financial component,” says Leavins. “We don’t just jump into business with a buyer client overnight. We have some very financial and ethical criteria that our buyers have to meet. We have an administration staff that keeps an eye on buyer capabilities, coupled with the trading group keeping their ears to the ground about who may be in trouble, so we can be on top of any potential issues. Rayglen is very proud of the group of growers and buyers that we currently work with.”
Rayglen, as an example of a broker, has created working relationships with strong U.S. companies that not only have a presence in the U.S. states bordering Canada but also have operations throughout the continental U.S. “The important thing is to associate yourself with someone who has done their homework and has had experience dealing in the U.S. in the past,” says Leavins.
Crossing the border can be a frustrating and confusing process, especially the first time a farmer tries going it alone, and the expertise of a broker can certainly make it a lot less painless.
Farmers also need to remember that the U.S grading system is not the same as Canada’s. “Before you start up the truck to head south make sure that you know the grading specifications for your grain and have all your bases covered,” advises Leavins.
Another advantage of going through a broker is that brokers maintain an unbiased approach and provide knowledge for their growers to help them achieve the best price when they do decide to sell. “We always encourage growers to look around and compare what we’re offering to what is available,” says Leavins. “Often if there is an opportunity out there with a company that we don’t deal with we will let the grower know that there may be a better option for them.”
Possibly one of the biggest attractions of a broker for most farmers is the time saved. Few farmers have the time to study the markets each day and stay on top of what is going on in the industry. That’s exactly the role of a broker. “We are a tool in the growers’ toolbox that does not get used every single time but is a very important part of their business,” says Leavins. †
There are several sources of information for farmers planning to sell grain to the U.S.
For more information about selling grain to the U.S. visit Canada-U.S. Grain and Seed Trade Info at www.canada-usgrainandseedtrade.info. You’ll easily find the link labelled “Canadian grain producer” at the bottom of the page.
This website was developed through the U.S. Grain and Seed Trade Task Group, a group that includes many trade and farmer associations. Funding for the site comes from collaboration and voluntary contributions from many individuals and organizations in the public and private section on both sides of the border.
The U.S. Department of Agriculture’s (USDA’s) Foreign Agricultural Service has information about importing. Find it at www.fas.usda.gov/importprograms.asp.
Canadian Grain Commission
The Canadian Grain Commission’s (CGC’s) website includes information about classes of licensing and license exemptions. At www.grainscanada.gc.ca select “English,” then, on the left side of the page, choose “licensees.” †