Grain settlements: separate moisture shrink from the drying charge

A grain settlement can reduce the delivered quantity for moisture, charge for drying, adjust the price for quality and deduct other agreed costs. Those adjustments operate on different bases. Reviewing only the final price per delivered bushel can conceal an incorrect quantity, an outdated schedule or a deduction applied twice.

Start with the delivery contract, the buyer's applicable discount and drying schedule, scale tickets, moisture and quality results, and the settlement statement. Match each load to a specific ticket and settlement line. Keep storage or deferred-pricing arrangements separate from a completed sale so the review does not assume every delivered load has already been priced.

Iowa State University Extension explains two approaches to corn moisture adjustments: a moisture discount applied to price, and a drying charge combined with a quantity shrink adjustment. Its examples illustrate the methods rather than current commercial rates. Establish which method the buyer actually agreed to use before attempting to recreate the payment.

Record gross vehicle weight, tare and resulting net grain weight, with the scale unit and ticket date. Retain the measured moisture percentage and the sampling or test reference available for that load. If a test is revised, keep both the original result and the approved revision linked to the calculation.

Check whether the settlement uses individual loads or an agreed weighted average. A simple average of moisture percentages gives a small load the same influence as a large one. When averaging is permitted, confirm the weighting basis and any rules about quality classes or separately priced contracts. Do not invent a blended result when the agreement settles loads independently.

Separate physical test results from commercial allowances. A moisture percentage describes the grain tested. A shrink factor or drying schedule describes how the buyer adjusts quantity or money under the arrangement. One cannot be substituted for the other merely because both are expressed using percentages.

Check the unit convention as well. Purdue's corn guidance explains the use of weight converted to 56-pound bushels in its discussion. That is not a direction to use the same conversion for every crop or contract. Retain the commodity and agreed conversion alongside the ticket so a spreadsheet does not apply a corn rule to another grain.

For a hypothetical corn load, assume 56,000 pounds at 20% moisture on a wet-weight basis. It contains 44,800 pounds of dry matter: 56,000 multiplied by 80%. If only water is removed and the target moisture is 15%, that dry matter represents 85% of the resulting weight. The theoretical resulting weight is therefore 44,800 divided by 85%, or approximately 52,705.88 pounds.

At the example's 56-pound conversion, the delivered quantity is 1,000 wet bushels and the water-only equivalent is approximately 941.18 bushels at the target moisture. The difference is about 58.82 bushels. This calculation conserves dry matter; it does not include an assumed handling loss, a price discount or a drying fee.

Purdue distinguishes loss of water from losses associated with drying and handling. That distinction matters when the commercial shrink schedule produces a result below the water-only equivalent. The difference may reflect an agreed allowance, but the reviewer should identify it rather than describe all of the deduction as measured water removal.

This mathematical check also helps catch an inverted formula. Dividing by the initial dry-matter percentage instead of the target percentage would move the result in the wrong direction. Show the dry-matter quantity explicitly so the calculation can be understood without trusting a hidden spreadsheet formula.

Assume the fictional buyer instead uses an agreed commercial shrink factor of 1.3% of delivered quantity for every moisture percentage point above 15%. At 20% moisture, the excess is five points. The deduction is 6.5% of 1,000 wet bushels, or 65 bushels, leaving 935 payable bushels.

Now assume a separate drying fee of $0.04 per wet bushel per moisture point removed. The charge is $200: 1,000 multiplied by five multiplied by $0.04. The base is the delivered wet quantity in this example. Calculating it on 935 payable bushels would produce a different result and would be wrong under the stated terms.

At an invented contract price of $4.80 per payable bushel, grain value is $4,488. After the $200 drying fee, settlement is $4,288 before any other agreed charges or adjustments. Keep quantity shrink and the drying fee on distinct lines. Deducting the 65 bushels again as a monetary moisture discount would reduce the payment twice for a calculation already included.

The commercial quantity is about 6.18 bushels below the water-only equivalent calculated earlier. Do not label that difference an error automatically. Compare it with the stated handling or other allowance and obtain clarification if the buyer's schedule does not explain its basis.

A different hypothetical buyer might pay on all 1,000 delivered wet bushels but reduce the $4.80 price by 1.8% for each of the five excess moisture points. That is a 9% price reduction, leaving $4.368 per wet bushel and $4,368 in total, assuming no separate drying or shrink deduction under that offer.

On these simplified terms, the alternative pays $80 more than the $4,288 settlement. Comparing only the quoted $4.80 headline prices would miss the difference. Comparing the alternative's discounted price with the first buyer's price per reduced bushel would mix bases and could lead to the wrong conclusion.

Include transport, unloading, storage and other relevant terms when comparing actual buyers. Keep the comparison tied to the same load, moisture result, delivery timing and price-fixing conditions. A higher net amount for an example does not establish that one buyer or method will always be preferable.

Ask about rounding and schedule increments. Some terms may use defined steps or thresholds rather than a continuous per-point calculation. Preserve the actual table and rounding order before concluding that a small arithmetic difference is a billing error.

Match the final settlement to the bank receipt and any advances, prior charges or authorized deductions. If the buyer previously advanced money against the same delivery, the remaining payment will be lower than the grain value without indicating another discount. Show that advance as a separate settlement movement.

Retain delivered physical weight, commercial payable quantity and the water-only analytical quantity as distinct measures. They serve different purposes. A commercial shrink schedule should not silently replace the source measurement in production, storage or other records that require the actual basis of the quantity.

Give the accountant the contract, ticket, test result, settlement and explanation of adjustments. The timing and presentation of the sale, fees and any remaining receivable depend on the business's accounting and tax requirements. This reconciliation supplies the evidence rather than prescribing a single entry for every grower or storage arrangement.

When questioning a settlement, specify whether the issue concerns net weight, the moisture test, target moisture, shrink factor, drying-fee base, quality deduction or price. Attach the relevant ticket and schedule version. A request to explain a low payment is much harder to resolve than a documented disagreement about one input.

Track a revised settlement back to the original load and payment. If the buyer corrects moisture but leaves the old drying charge in place, recalculate every dependent line. Close the case when the accepted calculation, any credit and the remaining payment agree, with the original measured evidence still available for the next review.