Contact(s): Dr. Mark Welch, 979-845-8011, jmwelch@ag.tamu.edu COLLEGE STATION – Knowledge of some little-known facts about buying and selling grain in Texas could save both farmers and grain elevator owners a lot of time. Most importantly, it could save them from unnecessary risk, according to the Texas Corn Producers Board and a Texas AgriLife Extension Service economist.
In Texas, grain elevators must be bonded for storage of grain, but not as grain buyers, according to Dr. Mark Welch, AgriLife Extension grain marketing economist.
“You have some insurance that your grain will be there when you get ready to sell, but no protection against the buyer being able to pay you,” Welch said.
When a public warehouse acts as a grain buyer, they are bonded, but it only protects grain depositors for storage, he said. The bond protection does not apply to forward contracts or other grain purchasing activities.
“Also, grain manufacturers and livestock feeders aren’t regulated by the Texas Department of Agriculture’s Warehouse Program,” Welch said. “They’re not subject to its rules and requirements and customers of these businesses are not under its protection.”
If grain is sold to an unlicensed buyer, and if they buyer doesn’t pay for the grain, there is no bond coverage available to help pay the seller, he said.
“Disputes are handled in civil courts and only civil penalties apply,” Welch said.
According to the Texas Corn Producers, the economic impact of grain in Texas is significant. In 2008, Texas farmers produced more than 253 million bushels of corn, 158.6 bushels of sorghum and near 99 million bushels of wheat.
“The value of production for those three grain crops was well worth more than $2.6 billion to the Texas economy,” Welch said. “In a time when grain markets and the overall economy is volatile, it’s extremely important for farmers to know their rights and responsibilities when selling their grain. There’s tremendous investment in these crops and risk, so farmers need to know the details.”
Welch offered the following rules of thumb for contracting grain:
– Have the contract in writing and understand the risk involved. If in doubt, do not sign.
– Know your customer. Knowledge of your customer’s business reputation and ability to carry out obligations may reduce risk. “Be sure the other party can explain how the contract works to your satisfaction, and how it works under all market conditions.”
– Maintain “open communication” with the other party before signing, and throughout the life of the contract.
To receive a copy of the report, “Selling Grain in Texas” contact the Texas Corn Producers Board or Welch at jmwelch@ag.tamu.edu . To receive Welch’s market newsletter, contact him at the same email address.
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