Ceres said its revenue is generated by its grain division, and revenues are predominantly composed of the sale of grain, storage and rental income, and other operating income that is earned. Since a significant portion of revenue is generated through the sale of grain, as a commercial commodities merchandizing business, revenues may vary from quarter to quarter due to fluctuations of agricultural commodity prices, Ceres said. The company said it has the “flexibility to be opportunistic” in its decisions to buy, sell or hold inventory based on market conditions such as grain supply, demand, and grain values.
Providing an outlook for the company’s Grain Division, Ceres said the 2016 cereal grain harvest in the U.S. and Canada began the growing season much like 2015 with timely rains and plenty of heat units, resulting in large supplies of all wheat classes, canola, oats, pulses and other specialty crops. Since that time, though, Ceres said spring wheat has experienced some quality issues.
“This has put pressure on protein merchandizing margins as basis levels have remained relatively flat, especially in the U.S., and something we expect will continue through much of the 2016-17 crop year,” Ceres said. “Meanwhile, late and consistent rains have delayed harvest in Canada and led to significant quality issues in durum and oats. This has created price volatility for these products and better merchandizing opportunities for companies with diverse origination and assets that allow for quality segregation. Canola harvest has also been delayed, however, quality is holding up and overall size of the crop is large. This bodes well for Northgate as we expect to buy from farmers throughout the year to supply our key customers.”
To maximize opportunities with this year’s crop and future years, Ceres said it is focused on increasing volumes merchandized both through and around its network, effectively lowering fixed cost per bushel handled and increasing revenues overall, and on extending its reach on both ends of the supply chain to access more attractive margins.
“Thus far, volume goals are being achieved and trending in the right direction,” Ceres said. “Extending presence up and down the supply chain takes time to develop, but is also moving in the right direction as the corporation increases its farmer-direct origination and key customer destination access in the U.S. and beyond.”
Ceres’ grain storage, handling, and merchandising unit is anchored by a collection of nine grain storage and handling assets in Minnesota, U.S., New York, U.S., Saskatchewan, Canada, and Ontario, Canada, having aggregate storage capacity of approximately 43 million bushels as of Sept. 30, 2016, including 5.4 million bushels of idled capacity.