Insights (Sponsored by StoneX) - 4

Case Study: Flexible Procurement
One FCStone Merchant Services' client, a corn
processor in the Midwest,
corn from various
traditionally bought
farmers. Through this
arrangement, the processor provided farmers with
various pricing options for how they secured board
value in advance of delivery.
Upon forward purchasing, the corn processor was
required to manage forward margin risk they may
otherwise be exposed to by fixing one side of their
processing margin. This type of risk management
consumed capital for many months.
Throughout this process, operational staff was
needed to manage farmer payments upon delivery
and to maintain a grain dealer's license, per local
state regulations.
Faced with these challenges, the processor was
looking for a solution that would enable the company
to not fully outsource corn origination but offset some
of the requirements. The processor has built deep
relationships with a number of its farmer suppliers over
the years that are key to its ongoing business success.
instead use an enhanced origination program that
offers more benefits and fewer shortfalls.
In this model, purchases are directed through
a third party contracting organization that buys
from the grower on a processor's behalf. In such an
example, FMS is the one that owns the inventory
that is sold forward to the processor and available
FMS tailored a program in which this corn
processor was able to continue to maintain its
role as the originator of supply from its farmer
partners while using FMS as the contractual
purchaser of the grain from the farmer. The
company is able to utilize FMS's full suite of risk
management tools, including structured hedge
solutions to achieve the pricing objectives of its
Additionally, FMS has managed all working
capital associated with the procurement and
storage of corn with the processor only needing
to pay for corn upon removing it from the bin to
process. In another way to make it easier for the
company FMS manages all farmer payments
and maintains the registration with the state as
the grain dealer who is purchasing grain from
for delivery on an as-needed basis.
This way of sourcing grain feedstock is also a flexible
type of procurement. Purchasers can manage
board prices independently without committing to
a supplier. By using FMS's network, a company can
expand its pool of potential suppliers and buyers
to expand its pool of counterparties.

Insights (Sponsored by StoneX)

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