RUSSELL – Getting the best price for a farmer’s grain, then turning around and selling it for the best price is how Lonnie Zahn describes being a grain merchandiser.
Unfortunately, it isn’t always that cut and dried, according to the 30-year veteran of the grain business.
“Being on Canadian Pacific (Railway), we’re struggling getting cars and that’s been a big challenge,” Zahn said. “It’s not a big deal if we’re dealing with $3.50 wheat, but otherwise the interest can be astronomical.”
As an example, Zahn said the elevator received a shipment of rail cars on April 29 that was ordered on March 10. He said it’s becoming a real gamble playing with the railroad because of the financial risk involved with not getting grain to market in a timely manner.
Not a lot of grain leaves Russell by truck and Zahn isn’t sure that’s a reasonable alternative anyway, given the rise in the price of diesel. Currently about 3 percent of the grain in this 1.35-million-bushel facility is shipped by truck.
With the price of grain much higher than a year ago, wider fluctuations in market price will occur, which could make or break a farmer or an elevator.
“We’re finally getting cars so we can get the grain out,” Zahn said. “They’re struggling and it’s effecting our bottom line.”
Zahn said merchandising has reached a point that Souris River Grain will only purchase commodities from 9:30 a.m. to 1 p.m. to stabilize the amount of loss or gain in one day. When prices were lower, there was a fluctuation limit of 60 cents a bushel. Now, it’s $1.35.
Zahn was talking to a producer on the phone one day and purchased grain from him. By the time the telephone conversation had ended, the market price of wheat dropped 20 cents.
“We only buy when the market is open,” he said. “It’s a big risk.”
2007 was a good year for the elevator and a lot of producers and it didn’t take long for the terminal to fill. As rail cars trickled in, so did more grain. By the time the grain was finally cleaned up off the ground it was time for 2008 spring’s work.
“We had 980,000 bushels on the ground last fall and we finished in mid-March” Zahn said. “That’s a lot of dollars sitting on a pile.”
And just about everyone in farming needs those extra dollars, according to Zahn. Input costs have nearly outpaced the increased grain value.
In fact, in some cases, inputs have risen higher than the value of the grain.
“This is the toughest year to be in the grain business,” Zahn said. “There’s so much pressure on farmers to produce because of the input costs.”
He doesn’t believe that wheat will drop back to $3.50 a bushel in the future. It can’t. With inputs where they are, wheat has to be worth $7 or $8, or it isn’t worth growing. If not, the government is going to have to control prices and that doesn’t look like a stable proposition at the present time.
But the new farm bill should be there to stabilize prices in the lean years, according to Zahn. Even with good reported prices, a strong farm bill should be in place. Statistics will show that not everyone collected when wheat hit $21 a bushel for about three or four days in February.
“There’s a rumor out there that everybody’s getting $20 for a bushel of wheat,” Zahn said. “The board shows it, yes, but our Dec. 31 average price was $6.20. A year ago, $6 wheat was a phenomenal price.”
He added the scary part was very few people were able to take advantage because they had sold their grain as it was increasing.
Zahn said it’s difficult to cut back on inputs because it takes the same amount of fuel today as it did three years ago to farm and cutting fertilizer will most likely reduce yields.
“Some might seed alternatives (legumes), but they’re not cutting back,” Zahn said. “Cuts mean a cutback on bushels and with $9 new crop wheat, a cut would be a mistake and they realize that.”
Souris River Grain Co-op has 35 employees in five locations; Russell, Kramer, Lansford, Antler and Newburg. There’s also the Souris River Co-op in Souris, which handles chemical and fertilizer and Cenex in Newburg.
In addition to wheat and barley, the complex moves sunflowers, canola, flax and some durum.
Last year most of the delivered barley was malting quality, which the elevator handled for Archer Daniels Midland.
“We bring malt barley in to process for ADM so it’s ready for the malt house when it leaves here,” Zahn said. “It goes to ADM in Milwaukee.”
He said the cleaner can process about 2,000 bushels per hour and during harvest, extra people are brought in to stay ahead of the harvest.
Zahn added combines these days can almost be a hinderance. They are so big and so efficient that too much grain comes too fast. It’s almost as if machinery has outgrown facilities.
Zahn has been a grain merchandiser since 1995 and worked in the Russell facility prior to that. He started his career with Souris River Grain Co-op in June 1978 in Kramer.
He lives in Upham, which is 20 miles to the southeast in McHenry County. That too can present a challenge. Zahn recalled the elevator closed early on a Friday because of a winter storm and he didn’t get home until the following Sunday morning. Another employee made the attempt, got stuck in a snow drift, was rescued and brought back to the elevator where staff took up refuge for most of the weekend.
Zahn would like to retire when he turns 62. He’s now 57. In the meantime, the trip to and from Upham is a pleasant one, as long as the snowfall isn’t too heavy.
“It’s an enjoyable route because I can think about everything on the way and relax on the way back,” Zahn said.
(Prairie Profile is a weekly feature profiling interesting people in our region. We welcome suggestions from our readers. Call Regional Editor Eloise Ogden at 857-1944 or Managing Editor Kent Olson at 857-1939. Either can be reached at 1-800-735-3229. You also can send e-mail suggestions to firstname.lastname@example.org.)