Weighted average grain price: what you have really sold at
Put in each contract's quantity and price. This works out the true weighted average, and how far the simple average of the prices is from it.
Leave the price empty for an open or basis contract. It counts in the total sold but stays out of the average until it is priced.
Why the simple average is wrong
Most people keep a rough average price in their head. It is almost always the plain average of the prices: add them up and divide by how many contracts there are. That ignores how many tonnes went at each price.
In the example, 500 tonnes went at $610 and two small contracts went at $700 and $690. The plain average of the three prices is $666.67. But most of the grain sold at $610, so the real average across the 700 tonnes is (500 × 610 + 100 × 700 + 100 × 690) ÷ 700 = $634.29.
That is $32.38 a tonne lower than the number in your head, or about $22,700 across the book. It is the difference between thinking you are above your cost of production and actually being below it.
Questions
How do you calculate a weighted average grain price?
Multiply each contract's quantity by its price, add those up, and divide by the total quantity priced. 500 t at $610, 100 t at $700 and 100 t at $690 gives $444,000 ÷ 700 t = $634.29 a tonne.
How are open or basis contracts handled?
They count in the total you have committed, but stay out of the average until a price is attached, because the tonnes are sold even though the money is not set yet.
Why is my simple average higher than my weighted average?
Because more grain went at the lower prices. The simple average treats a 100 tonne contract the same as a 500 tonne one, so a few small contracts at good prices pull it up.
Every contract, bin and load, in one place
GrainPosition tracks your grain contracts, bins, load tickets and weighted average price, in tonnes or bushels, and shows what you contracted at against what you were actually paid.
There is a live demo with nothing to sign up for.
Have a lookWant this for your real farm?
Leave your email and I’ll get in touch to set up your book in GrainPosition from what you already have: a spreadsheet, contract PDFs or photos of them. Nothing is charged today.