FEATURE-Grain merchants devise perks to lure U.S. farmers: By Mark Weinraub CHICAGO, Feb 2 (Reuters) - U.S. agribusiness companies, aiming to ensure a steady flow of grain to their elevators and processing plants, are becoming more creative with incentives they offer farmers. A health care program from industry giant Cargill Inc. is the latest step up from the barbecue parties, free grain storage and financial planning assistance grain companies have offered farmers to ensure steady supplies of corn, soybeans and wheat. But farmers can be stubborn customers when prices are not in their favor -- holding back grain from the elevators and processors that depend on their supplies to operate efficiently. They will not be roped in easily. "How it impacts their bottom line is really what's going to drive their decision," said Ron Gray, who operates Gray Farms in Claremont, Illinois. He farms 1,650 acres of corn and soy.
Cargill AgHorizons, a unit of Minneapolis, Minnesota-based Cargill Inc., upped the ante in January when it offered to help farmers pay for health insurance. Cargill's Harvest Health plan will pay farmers up to $5,450 a year for health care if they pledge to sell a certain amount of grain to Cargill. Cargill said there was no other comparable program for farm families, and noted that health insurance premiums have jumped nearly 60 percent since 2000. The proposal has got the attention of other grain companies, which farmers said had begun inviting them to meetings to discuss what a company should offer to ensure a consistent supply of grain. Perks are just one piece of the puzzle for farmers trying to maximize their profit. By itself, the promise of health insurance probably will not guarantee any sales, but it does pique farmers' interest. "I would say incentives go a long way, look at the airlines industry with frequent flier miles," said Jim Porterfield, director of special research projects for the American Farm Bureau. "You can do the same thing with health insurance." But as important as health insurance is, farmers must balance it with other interests. Many farmers send their grain to cooperatives they have invested in and in whose success they have a stake.
"Their corn is going to follow where their money went," said Bob Wisner, agricultural economist at Iowa State University. Some farmers also shy away from long-term commitments to one company, a requirement of Cargill's health plan. "In general, farmers are going to be a little bit leery of that," said John Kuhfuss, a farmer in Illinois. He said companies with a guaranteed stream of sales may not bid as high for harvested crops when it comes time to buy grain. Farmers also face rising costs on many fronts besides health insurance. For example, the high cost of gasoline deters farmers from hauling grain long distances, no matter what benefits are offered by an elevator or processor. "This (the health plan) is kind of new and different but you have still got to live within a reasonable distance to a Cargill facility," Iowa State's Wisner said.
Cargill's competitors such as Bunge Ltd. and Archer Daniels Midland Co. will monitor the success of Cargill's health insurance plan, but farmers should not expect copycat programs right away. Companies already offer smaller incentives. One grain elevator hosts a party every other year, and does not require farmers to guarantee future sales as an admission ticket. More than 1,000 guests show up for a day of barbecue and door prizes. It does not add up to the cost of health insurance, but it does offer one thing the Cargill plan does not. "This is for free," said a grain dealer. "There's strings attached to the Cargill deal, I like to look to it (barbecue) as an appreciation for the business you have done instead of here's a carrot so we can get some business from you," the grain dealer said. END
