Farmers Coop Columbus
News & Commentary
CoMark Grain April 2013 Newsletter
Things are looking much better in our area with the moisture we have received over the last couple of months. Hopefully the rain keeps coming our way to finish the wheat crop and for fall crops. The first quarter of our fiscal year is over, and so far things are looking good. Now we need wheat to fill the bins and everyone will be happy. Below are some common questions about CoMark that are asked.
What is CoMark and what do they do?
Fertilizer Purchasing: CoMark was founded in 1992 as a fertilizer purchasing group. Eight Coop managers from the SC KS area thought that if they pooled their buying demand into one entity it would give them more market clout. This has been true over the years.
Fertilizer Assets: The group realized a need to add liquid fertilizer storage for a couple of reasons. First, during peak fertilizer season trucks couldn't keep up with producer demand and would run out of product locally. Second, the group was able to buy the Fertilizer in off peak times when prices are lower and store it to keep from buying it during peak seasonal needs. By building these liquid fertilizer tanks together, costs were reduced to each member Coop.
Safety: New rules, regulations, and standards made a need for a safety person to be hired. Splitting the time of one person between eight Coops was better than each of them hiring their own safety professional or training eight people to do it part time.
Grain: CoMark Grain Marketing LLC (CGM) started in 2008 and currently has 14 Coop members. The reason it started revolved around the same needs of the formation of the fertilizer purchasing group. To sell grain together for market clout and take advantage of other inefficiencies in the market with an experienced professional staff.
Fuel: The success of CoMark Grain and market volatility spurred the formation of the fuel department. The thought was that the success that was realized in the grain could be used in fuel to make a more efficient model with a dedicated professional staff. Market volatility also created the need for risk management processes just like grain.
What are the advantages of CGM over the way my Coop used to sell grain?
Management: CGM has a professional sales and accounting staff. We specialize in grain. We are always looking at the markets around us and make the best decisions with the information we have at the time. Before CGM most GM's at the Coops made the sales decisions. On top of everything else that went on in a normal day they had to try to keep up with the local market and make sales decisions while not having the cash grain market insight that the management team at CGM has. CGM is determined to get the right bushels to the right place at the right time based on freight costs, quality requirements, and other market factors.
Asset Utilization: We ship the grain that needs to move most or that is best positioned to the end user the grain is going to. This has all but stopped terminal storage costs which used to average $750,000+ annually when each Coop was on their own.
Position Management: We can sell grain ownership out of any location from any location. Example: We own wheat at Anthony who doesn't take a lot of fall crops we can ship that wheat ownership out of Ark City who needs to move their wheat to make room for fall crops. Or if we own Corn at Cunningham and the Western KS feedlot market isn't as strong as the Springdale, AR chicken market, we can sell corn to Springdale out of Columbus using the Cunningham ownership. This is called arbitrage.
Logistics Efficiencies: Centralized Truck Management allows us to see where trucks are needed the most. This is especially helpful during harvest. We can also minimize freight costs by running trucks on rounds like Cheney corn going South with Kiowa wheat moving North to Wichita that cuts freight costs on both commodities being hauled. We also utilize backhauls that Coops didn't used to utilize. Over the last two years we have saved over $1,000,000 in freight by utilizing backhauls rather than just running trucks at full freight. This is only possible because all functions are in one building.
Risk Aversion: Your Coop owns a percentage of CGM based off of their five year average producer receipts. So for example if your Coop has a freeze in your area while other regions of the CGM territory doesn't have that problem your Coop will still receive their percentage of the profits that CGM generates even though they take a crop that is substantially below average.
Other: By working together there are some cost savings. Interest rates are lower, Hedging costs are lower, and we can package other things together to provide better value in services for your Coops like websites and real time quotes.
All Profits from CGM go back to your local Cooperative so everyone shares in the success.
How does CGM set local grain bids and why is my local bid different from another location?