Saturday, February 21, 2009

I'm not too proud or principled...

To gossip.

First, the dirt on Cargill.  Important sources asked me if I had heard about Cargill reneging on forward contracts.  I called some faces - in fact, THE Face for Cargill, who investigated.  It turns out (predictably, I must say) the rumor was overblown.

The fine print gotcha alleged had to do apparently with a delivery location change and the farmer was grumbling that Cargill wasn't paying the difference in trucking.  I do not label this "reneging on a contract", especially when the delivery point may actually be closed. This whole "tempest in truck" was likely predicated on the demise of Verasun, and Cargill's involvement as a supplier to some of the ethanol plants.  Cargill has not, does not , and will not default on forward contracts.

As farmers mourn the loss of $6+ March delivery contracts they sagely negotiated last year, it is understandable to look for co-conspirators, even if their contract was only with the dearly departed Verasun. Meanwhile, the supply chain for Verasun disintegrates, dragging down smaller elevators and producers alike. Switching to attack mode, I fear, is the wrong choice.

Demand is evaporating like a half-inch rain on a July afternoon. In 2009, the #1 Rule is : Don't go to war with customers.  In fact, don't go to war with anyone in your value chain - landowners, vendors, lenders, etc.  Trust has vanished and those who can prove to be trustworthy AND extend preemptive trust to others will not only strengthen their future prospects, but help to build the foundation of more efficient commerce for all of us.  Conflict is a luxury good, and we can't afford the economic deadweight it causes.

Disclaimer: Cargill is my number one customer, and I have many friends in the organization. They advertise in FJ Media and, to my great pride, sponsor USFR.  There is every reason to discount my opinion therefore, but I can show you thirty-five years of honest, reliable business dealings to back up my claims. In fact, more than once they have helped me find a solution when I struggled to meet my half of a deal.  Your experience may vary, but I have no qualms defending a good business partner, and you should stand up for yours during these days of anger and accusation.

Second, some verified recent cash rent numbers. (I would buy a used horse from these sources, in other words)
  • Central IL - 220+ bu. ground.  $400/A  3 years, annually upfront
  • Central IL - 220+ bu, ground.  $505/A
  • East Central IL - 190 bu. dirt.  $220-230 3 years, spring-fall pay
Does anyone besides me pick up a subtle discontinuity here?


Anonymous said...

Managers of Cargill , like other places , is the deal maker or breaker ,,when i was short on my bean contract they made a good settlement , unlike ADM who made some producers buy beans to make there delivery contract (actually they bought beans from cargill to deliver to ADM crush plant)....on down side,,Cargill has done away with in house credit (even 30 days) and turned it over too FCC in canada-there stand is fill out fcc forms or bring a check everyday you want too buy something..lucky here we have many choices --regards-kevin

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