The grain/oilseed sector markets its products to three major sets of customers: grain merchants and handlers, livestock producers, and renewable energy/industrial users. While exports are also critical to the sector, we focus on the domestic and international markets where grains/oilseeds are used.

The first key customers are grain merchants and handlers that aggregate farm output into meaningful quantities that can be delivered to end users and processors. These customers also have the key role of storing a crop that is harvested in a few months and consumed over the course of a year. These firms are typically private companies and traditional farmer cooperatives. Today, there is substantial concentration among the private grain handling and merchandising companies. Crop producers, however, are still able to market their products on reasonable terms. And, the U.S. Department of Justice has shown a willingness to eliminate potential market power advantages in this industry segment when necessary. Overall, the economic structure of this portion of the grain/oilseed supply chain is unlikely to adversely impact the profitability of grain/oilseed producers because they can easily switch between competing handlers and/or invest in their own storage and handling facilities.

The second key set of customers for grain/oilseed producers is the animal agriculture sector. Feed use currently accounts for roughly half of grain/oilseed demand. Although livestock farms, too, have undergone dramatic consolidation in recent decades, they remain, by and large, unable to exert significant pressure on grain/oilseed producers. However, the expansion of animal protein markets is important for expanding demand for grain/oilseed production. Beef, pork, and dairy producers have all recently experienced significant financial hardship as feed costs escalated from increasing overall grain/oilseed demand. In the future, a healthy and vibrant animal agriculture sector is critical to the long-term profitability of grain/oilseed producers.

The renewable energy and industrial food manufacturing sector is the third key customer of grain/oilseed producers. This sector has recently undergone dramatic growth and also significant concentration, with a number of mergers and acquisitions among ethanol and food manufacturers. However, because grains/oilseeds are traded as commodities, the ability of the sector to exert significant buyer power over producers is limited.

Customers likely will not exert significant, negative influences on industry profitability in the future due to traditional concerns over concentration. Instead, the impact of these industries will be driven by their fundamental profitability. Here, there is some cause for concern. The large increases in demand associated with renewable energy production, for example, are largely policy driven. Should the policy become less attractive to renewable energy production, there could be significant declines in biofuel demand. Likewise, these industries are highly competitive and dependent upon energy prices. Sustained low, energy prices would significantly reduce demand from these customers. Animal agriculture should significantly benefit from rapid population and economic growth in China and India. However, animal protein is generally a higher cost source of protein, and slowing economic growth in these countries would significantly reduce demand for animal protein and hurt grain/oilseed producers.