Agribusiness · Crush margin, basis and freight

Keep more of the spread.

An agribusiness earns the spread between the crop it buys and the oil, meal and grain it sells. Crop prices, basis, freight and currency move every day, and each one moves that spread. Vadar Alpha prices every purchase, crush, cargo and quote against today's market.

Inputs
Grains, oilseeds, freight, FX
Decisions
Buy, make, sell, hedge
Measured as
Margin vs. agreed baseline
Start
Days, not months
The problem

One crop. Five places to lose the margin.

The margin is set at every step from farm to customer: what you pay growers, what you crush and refine, how you ship and what you charge. A different desk prices each step, often from a different spreadsheet, and the spread leaks in the gaps between them.

  1. 01

    Growers hold back

    When prices fall, farmers stop selling forward. The stock you do carry, and its cost, stays on your books.

  2. 02

    A weekly mix in a daily market

    What to crush and where to send the oil often comes from a weekly sheet, while crush spreads move every day.

  3. 03

    Freight left open

    An unhedged barge or ocean freight turns each cargo into a bet on fuel and currency.

How it works

Crush to the spread, every day.

Each morning Vadar Alpha compares the crush margin at each plant, using today's price for the seed, the oil and the meal. It tells each plant what to run, with the margin in dollars and the point at which it stops paying.

Fig. 1 · Crush margin: market range and margin capturedIllustrative
Crush margin, $ per bushel
  • Weekly plan
  • Daily with Vadar Alpha
  • Market range
  • Gain with Vadar Alpha
$1.00$1.50$2.00$2.50JanFebMarAprMayJunJulAugSepOctNovDecDaily with Vadar Alpha · $1.90Weekly plan · $1.60Jan: Weekly plan $1.50, Daily with Vadar Alpha $1.60Feb: Weekly plan $1.40, Daily with Vadar Alpha $1.60Mar: Weekly plan $1.35, Daily with Vadar Alpha $1.65Apr: Weekly plan $1.55, Daily with Vadar Alpha $1.85May: Weekly plan $1.70, Daily with Vadar Alpha $2.00Jun: Weekly plan $1.60, Daily with Vadar Alpha $1.95Jul: Weekly plan $1.45, Daily with Vadar Alpha $1.75Aug: Weekly plan $1.35, Daily with Vadar Alpha $1.65Sep: Weekly plan $1.60, Daily with Vadar Alpha $1.90Oct: Weekly plan $1.80, Daily with Vadar Alpha $2.15Nov: Weekly plan $1.70, Daily with Vadar Alpha $2.05Dec: Weekly plan $1.60, Daily with Vadar Alpha $1.90
Weekly planDaily with Vadar AlphaMarket range (low)Market range (high)
Jan$1.50$1.60$1.30$1.90
Feb$1.40$1.60$1.25$1.85
Mar$1.35$1.65$1.20$1.95
Apr$1.55$1.85$1.35$2.10
May$1.70$2.00$1.50$2.25
Jun$1.60$1.95$1.45$2.20
Jul$1.45$1.75$1.30$2.00
Aug$1.35$1.65$1.20$1.90
Sep$1.60$1.90$1.40$2.15
Oct$1.80$2.15$1.60$2.35
Nov$1.70$2.05$1.55$2.30
Dec$1.60$1.90$1.45$2.10
Three steps
  1. 01

    Connect contracts, plants and cargoes

    We read your grower contracts, plant runs, stocks, cargoes and hedge positions from the systems you already use.

  2. 02

    Price each step against the market

    Purchases, crush and refining runs, freight and quotes are each priced against futures, basis, freight and currency.

  3. 03

    Act, then measure

    Merchandisers, plants, traders and sales get instructions. We score each result against a baseline your finance team agrees on.

Fig. 2 · Margin gain by step, farm to customerIllustrative
Margin gain, $M per year, crush network
Origination$3.2MOrigination, Margin gain: $3.2MCrush$5.8MCrush, Margin gain: $5.8MRefining$2.4MRefining, Margin gain: $2.4MFreight$1.9MFreight, Margin gain: $1.9MSales$2.7MSales, Margin gain: $2.7M
Margin gain
Origination$3.2M
Crush$5.8M
Refining$2.4M
Freight$1.9M
Sales$2.7M
What it earns

Every dollar, traced to a step in the chain.

Each gain is tied to the decision that produced it, from the grower contract to the customer quote, and measured against a baseline your finance team agrees on. We count each dollar once.

In depth

A closer look at crush margins, basis and merchandising

An agribusiness earns its margin in a chain: buy the crop, process it, ship it and sell it. Each link has its own price risk, and the margin is what is left after all of them.

01

Origination and basis

Grower contracts set the cost of the crop. Pricing them against futures and local basis each day shows when to buy and when to wait. When growers hold back in a falling market, the cost of carrying the stock you hold is priced into each decision.

02

Crush and refining choices

A crush plant can often run more than one seed, and a refinery can send oil to food or to fuel. Each choice has a margin that changes with oil, meal, energy and renewable fuel credits. Vadar Alpha prices those choices every day, within each plant's tank, line and contract limits.

03

Freight, fuel and currency

Barge and ocean freight, bunker fuel and currency can turn a profitable cargo into a loss. Vadar Alpha shows each cargo's exposures in one view and sizes the hedges to what is still open.

04

Pricing to replacement cost

Many food and feed customers buy spot. Quoting each one against what it costs to replace the product today, not last week's sheet, keeps margin from eroding before delivery.

What your team sees

One instruction. One owner. One number.

Every decision arrives as a plain instruction, with the dollars at stake, the reason, and the point at which it stops paying.

Measured as
  • Origination margin against basis
  • Crush margin captured
  • Net price realization
  • Earnings at risk
Instruction · MakeDue today
Plant 2: move 15% of this week's crush from soybeans to canola.
+$410,000
Owner
Plant scheduling
Why
Canola crush earns $0.42 per bushel more than soybeans for November oil and meal. This stops paying if the gap falls below $0.15.
Measured as
Crush margin against the weekly plan
TakeOverride
Questions

Questions we hear most.

What is crush margin?

Crush margin is the value of the oil and meal from a bushel of oilseed, minus the cost of the seed. For soybeans, the board crush uses CBOT soybean, soybean oil and soybean meal futures. A plant's real margin also depends on its yields, energy, freight and basis.

What is basis, and why does it matter?

Basis is the local cash price minus the futures price. It reflects freight, storage and local supply and demand. Two purchases at the same futures price can earn very different margins, so Vadar Alpha prices each grower contract on both.

How do you handle freight and currency?

As exposures, the same as the crop. Each cargo's freight, fuel and currency show beside its grain position, and hedges are sized to the amount still open.

Do we need to change our trading systems?

No. Vadar Alpha reads from the systems you already use, such as your trading and risk system, ERP and plant systems. We start with one decision, such as one plant's crush mix, and show its value on your own data in days.

Start here

See what your margin could be.

A 30 minute conversation to see where your margin leaks and whether we can help.

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