What is a Grain Broker?

A grain broker is someone who facilitates the purchase and sale of grain. Like brokers in other areas of the financial industry, grain brokers serve as a point of connection between buyers and sellers, working to get the best deal for all parties involved. The size of a grain brokerage can vary, depending on where it centers its operations.

Grain brokers may work at local markets and they can also work at large commodity exchanges, which are often located in urban areas near railway hubs to make trade easier. When a farmer approaches a grain broker, the broker takes a sample of the farmer's grain. The grain is inspected for quality and stored in the brokerage. The broker in turn meets with people who want to buy grain, providing them with access to the sample and negotiating a price which will be amenable to both parties.

To become a grain broker, it is usually necessary to have a bachelor's degree in a field related to finance or agriculture. Some have degrees in public relations and communications, because communication is key to being an effective broker. Brokers can work for a brokerage under more experienced brokers or they may operate independently. On a local level, a single broker may be able to handle the day's business, while brokers who work with commodity exchanges usually need the support of a large office with numerous personnel.

The grain broker typically takes brokerage fees for every deal arranged. These may include flat fees per unit of grain in addition to percentage fees based on the amount of the deal. The broker discloses these fees up front so that buyers and sellers can decide whether or not the fees are acceptable. Brokers who charge high fees may also offer special services as an incentive for people who might otherwise turn down a relationship with the broker on the basis of cost.

Working as a grain broker requires a knowledge of the commodities market as well as the ability to predict, at least to some extent, market movements. A broker who does not think ahead can end up with unsatisfied clients such as buyers who pay too much for a grain which falls out of favor or is produced in surplus or sellers who are angry that their grain sold at a price lower than it deserved. However, even with the best skills and years of experience, a grain broker ultimately cannot make predictions about market movements with confidence.