Guidelines for buying/selling high moisture shelled corn

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Every fall some dairy and livestock farms are looking to purchase extra shelled corn. In certain years, like this one, some cash crop farmers will have immature corn that is very wet and may not make suitable dry corn but could be fed as high moisture shelled corn (HMSC). The question then becomes how to negotiate a price for HMSC that will be in the best interest of both parties. Here are some guidelines to consider:

1. The amount of corn you wish to purchase, normally quoted in wet bushels.

2. The range of corn moisture percentage you will accept (for example nothing above 34% moisture and nothing below 22% to avoid storage and/or feeding problems).

3. How you will establish the corn price. For example, routinely based on the market price of corn at 15% moisture from a local grain establishment with the HMSC volume (in bushels) adjusted to an elevator’s shrink table (see Table A), and an adjustment made for not having to mechanically dry the corn.

 4. Offer some guarantee of payment as sellers get nervous when they deliver $40,000 worth of corn to a person they don’t know, and may never meet. Some farms are routinely getting a guaranteed note from their lender up to a set dollar amount; others are setting up an escrow account with a third party such as a lender to draw out of as the corn is delivered.

 5. Ask the crop owner if there is a mortgage on the crop, and if there is, how the payment should be handled (this will avoid legal hassles down the road).

6. Determine trucking cost, which is routinely $3.00 - $4.00 per loaded mile, but it can move up or down depending upon the price of fuel.

How to determine pay price for delivered HMSC:
1. Agree, before delivery, to a market base price for corn that is 15% moisture. You can use an area elevator, ethanol plant, etc. to determine the current corn price and then negotiate your price from there. If you have a method to determine corn test weight you may also agree to discount the base price if the test weight is below 54 (see Table B). Other possible discounts or outright refusals are for foreign material, kernel damage, mold, or sour smell.

2. Determine actual corn moisture to make sure it falls within the desired range. Local elevators will have moisture testers if you do not have access to one. Then negotiate a price reduction for not having to mechanically dry the corn. The corn market price is based on 15% moisture corn so the drying cost needs to be considered. Again local grain establishments can be used to determine average drying fees. Realize the end price comes down to a negotiation between the two parties and should be a “win-win” for both parties. Some back out 100% of the drying costs, some take out only 50% of the savings, and some make no adjustment at all.

3. Determine delivered wet weight of truckload from the trucker’s certified scale receipts of the loaded and unloaded weights.

4. Then use the following equation:

“multiplication factor from Table A” TIMES “delivered wet weight” TIMES “market price of dry corn per bushel” MINUS “drying cost adjustment” DIVIDIED BY 56 (which is the weight of 15% corn per bushel) EQUALS “value of truckload of corn”. 

Here is an example:

47,458 pounds of wet corn delivered

$6.90 is the agreed price per bushel for 15% moisture corn

Corn is 31% moisture

Drying cost is $0.04 per point of moisture and it is agreed all drying cost will be taken out of the corn price

Trucking is to be $3.80 per loaded mile delivered from 12 miles away.

.781* X 47,458 X {$6.90 – ($0.04 X 16)} = $4,143.30 value of truckload of corn
 56

The following Michigan State University representatives reviewed and contributed to this document: Roger Betz, Senior District Extension Farm Management Educator, Dr. Roy Black, Agricultural, Food, and Resource Economics Specialist and Dennis Stein, District Extension Farm Business and Risk Management Educator.

$4,143.30 + ($3.80 per mile X 12 miles) = $4,188.90 truckload value including trucking

$4,188.90 / (47,458 / 2000) tons = $176.52 delivered price per ton of 31% HMSC

This is only an example. Farms should calculate their own numbers when determining their final charges.

 An adjustment to the market price may be made if the test weight of the corn is low.

Shrink factors in the following condensed table (Table A) have a range of 1.4% shrink per point of moisture up to 2.0% shrink per point of moisture. This increases as percent corn moisture increases. It also incorporates a percent dry matter handling loss.

The following Michigan State University representatives reviewed and contributed to this document: Roger Betz, Senior District Extension Farm Management Educator, Dr. Roy Black, Agricultural, Food, and Resource Economics Specialist and Dennis Stein, District Extension Farm Business and Risk Management Educator.

Source: Gerald Lindquist, Michigan State University Extension


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