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Grain Merchants

The Job

Grain elevators are structures that resemble silos where grain is stored and sold. They are a common sight in the agricultural and livestock regions of the Midwest, South, and Southwest. Grain merchants do most of their buying at the local grain elevator, where they meet with area farmers and try to negotiate a fair price. The grain elevator, which may be privately or cooperatively owned, then sells its grain to the terminal elevators located in cities with good transportation access, such as Chicago, Minneapolis, Omaha, Kansas City, and Fort Worth.

Grain merchants must have good instincts about when it will be most profitable to purchase grain. They may buy grain when the supply they have on hand reaches a predetermined reorder point, when a person or company specially orders it, or when market conditions are especially favorable. When purchasing grain, merchants must consider the type of grain specified, its market price, quantity discounts, freight handling or other transportation costs, and delivery time. Much of this information can be obtained by comparing listings in catalogs and trade journals, interviewing suppliers' representatives, keeping up with current market trends, and examining samples. Many grain merchants use computers for online access to up-to-date price listings or programs that keep track of inventory levels and process routine orders.

Merchants must be sufficiently familiar with the various qualities of grain to determine whether to purchase certain grains. They inspect samples of grain by weighing them, checking their moisture content, and examining them for insects or other damage. Grain must also be classified according to type. The U.S. Department of Agriculture (USDA) has developed grain standards to ensure that grains of a certain grade from all over the country meet the same specifications. After merchants make an initial appraisal of the quality of the grain, they send samples to a federal grain inspector for an official appraisal.

Although grain merchants often are involved in many aspects of the buying, storing, and reselling process, there are two major specialists who perform different functions in this occupation.

Grain buyers evaluate and purchase grain for resale and milling. They select the type of grain to order based on current demand and possible future considerations. Grain buyers arrange for the transportation and storage of the grain and identify possible resale markets. They hope to make money by reselling the grain for a higher price than they paid for it. They either buy the grain themselves, hoping to sell it in the near future, or buy and sell for businesses, making a commission on each sale.

Buyers must keep up-to-date on all information that affects grain and grain prices. In making purchasing decisions they must take into account the weather, planting schedules, consumer trends, crop qualities, and government standards both in the United States and abroad.

Because of market fluctuations in the price of grains, holding on to grain for any length of time is risky. To minimize their risk, buyers may purchase commodity futures, which are agreements to buy or sell an amount of grain at a future date. These futures are hedges against changes in the price of grain. Later the buyers sell their supply of grain to a food processor or grain exporter and buy back their hedges. 

Grain managers work at terminal elevators or other holding facilities. Managers must inspect all the grain that comes to the holding terminal and calculate its market value. In estimating its market value, managers look at moisture content, protein, oil, damage, and the presence of live insects, as well as costs for transportation and handling. They may also send samples to federal grain inspection agencies for a government standardized analysis.

Managers keep daily records on the kinds and grades of grain received, prices paid, amount purchased, and the amount in storage. They also supervise grain elevator workers in the unloading, loading, storing, and mixing of the grain for shipment and milling.