FOB plant vs delivered: freight in feed buying

FOB plant is the price of a feedstuff at the mill or ethanol plant door, before a foot of freight. It is the number USDA quotes for most feedstuffs and the one the board leads with, and it is not what the feed costs once it reaches the farm. Add the haul and a delivered price can run well above the board, which is why the cheapest quote is not always the cheapest feed.

What FOB plant means

FOB stands for free on board. An FOB-plant price means the buyer takes ownership at the plant and pays the freight from there, so two buyers at different distances pay the same FOB price and very different delivered prices. USDA also reports some feedstuffs on a delivered basis, and the reports mark which is which. Reading a feed price without knowing its basis is reading half a number.

Freight and the haul radius

Feed is a freight business because most feedstuffs are heavy and cheap per ton, so the haul is a big share of the delivered cost. A feedstuff that is a bargain at the plant can lose that edge over a couple hundred miles of trucking, and a dearer feed made next door can beat it at the farm. That is the haul radius, the distance a feedstuff can travel before freight eats its advantage. Wet feeds have the shortest radius because you are paying to move water, dry ones the longest.

The cheapest board price is not the cheapest fed price

Put a number on it, and read this as illustrative because freight moves with the lane and the season. Say a feed is 150 dollars a ton FOB the plant and the haul runs 15 dollars a ton nearby or 45 dollars a ton from far off. The same board feed lands at 165 or 195 delivered, and against a local feed at 175 delivered the far one is the worse buy despite the identical board price. Freight is not a rounding error on a heavy, cheap feed. It is part of the price.

Worked example

The table above is the live board by region, with the basis each region's quotes are published on: FOB plant, delivered or a mix. Feed prices by region breaks each region out feedstuff by feedstuff, every price with its own basis. Compare like with like: an FOB price and a delivered price are not the same number, and the basis column tells you which you are looking at. To rank feeds on what the nutrient costs, take these prices to the leaderboard; to know what lands at your farm, add your own freight.

The Ration reports the USDA feedstuffs prices and their FOB-or-delivered basis as published. It carries no freight feed, so any freight figure here is illustrative, and your delivered cost is the board price plus your own haul.