As planters traverse farm fields these days, grain storage seems a distant thought. But before you can say “bottleneck,” harvest will be here.
Will you be ready?
Planning now for ample on-farm storage can nix time-consuming and costly bottlenecks at harvest. Because it ensures ample storage space, advance preparation can help assure that you won't need to pile grain on the ground. And if you need to build bins or other storage structures, planning and building now can help you avoid labor shortages close to harvest.
“You'd better take care of it before harvest season, or you may not get it built,” says Burl Shuler, senior vice president of GSI Storage and Equipment, Assumption, IL.
Should you store?
Before you build a new storage system or revamp an old one, consider whether you need it. On-farm storage isn't for everyone.
Bear in mind that it can help you access price spikes following harvest. For example, Minnesota farmers have 25 to 30 reasons to store their corn after harvest, says Stan Stevens, University of Minnesota extension economist.
“From fall to spring when the Mississippi River freezes up, prices tend to appreciate 25 to 30 cents a bushel,” Stevens says. Though the amount may vary, similar spreads exist in other parts of the Midwest.
On-farm storage pays if it prevents combine shutdowns triggered by long waits in elevator lines. But once you solve that problem, you're often better off to sell grain and buy a futures contract in order to realize price spikes, Stevens says.
The $0.25 to $0.30/bu. storage gain isn't pure profit, he reminds. Besides construction costs, you'll also forego the interest on the money you would glean from grain sales at harvest.
“Once you tie up your capital in a facility, you won't be able to use it someplace else,” Stevens says. Storage investments can divert money away from more potentially lucrative opportunities, such as buying or renting more land.
“A 25 to 30 cents a bushel gain from fall to spring is not to be ignored,” Stevens says. “But you won't necessarily be 25 to 30 cents a bushel better off.”
The payoff from on-farm storage can depend upon your distance from an elevator, says Ken Hellevang, North Dakota State University extension agricultural engineer.
“With the distances we have between farms up here, it just isn't practical to be running to the closest elevator that's 20 miles away,” he says. “Even though I hear economists say that it's better to haul in the grain and buy futures or options, I still find that farmers need to efficiently harvest and have a place where they can condition and warehouse grain for a short period of time before they take it to the elevator. Farmers need to have enough capacity to handle what they are producing. Most farmers up here have the capacity to store a year's harvest.”
Uncle Sam's plan
Let's say you've determined that storage pays and you're short on bin space. Depending upon bin size, construction costs of $1 to $1.50/bu. can make you cry “uncle” … literally.
Fortunately for you, the uncle in question is Uncle Sam. A federal loan program to finance bin building, launched in 2000, has been improved this year.
Last year, the program had the opposite effect that the government wanted, says Charles Sukup, president of Sukup Manufacturing Company, Sheffield, IA.
“People who were looking ahead to buy then held off because there were rumors that they wouldn't be eligible for the program,” Sukup says. “It brought things to a standstill. People quit buying because of the program.”
But Sukup is optimistic about changes that have been made in this year's program. The loan program requires just a 15% down payment, compared to last year's 25% requirement. This year's program also includes financing for silos and bunker silos. Interest rates continue to remain attractive at approximately 5% annually over a seven-year term.
The $100,000 loan limit also has also been relaxed for multi-partner farms. For example, a farm with three partners could qualify for a $300,000 loan — $100,000 for each partner. This is contingent upon each member signing the note and security agreement for the loan.
During fiscal year 2000, the Farm Service Agency (FSA) made 1,995 loans totaling $54,551,000. “That was less than we anticipated,” says Chris Kyer, an FSA program specialist. “But we didn't begin the program until May 18 and missed some of the construction season. We expect to do better this year.”
Even with the loan program, storage sales have been sluggish, says Craig Poolman, division president for the Chief Agri/Industrial Division, Kearny, NE.
“There seem to be a lot of requests, but we also see a lot of hesitation for people to pull the trigger and complete the projects,” he adds. “A lot of that has to do with the economy. In some areas, farmers are also talking about increasing soybean acreage and decreasing corn acreage, which means less storage will be required. If this is true, there will be a slowdown in storage projects.”
Which bin size fits your farm?
Two years ago, storage industry experts predicted that identity-preserved grains would spring a comeback for small bins. But in many cases, that has not occurred. Thus far, farmers have tended to store identity-preserved grains in large bins, says Randy Van Langen, vice president of marketing for MFS/York/Stormor, Grand Island, NE.
“We thought we'd be selling more bins that weren't quite so large,” he says. “But people instead looked at the cheaper cost per bushel of large bins. Many people who have raised these crops have done so in a volume that justifies the larger storage capacity.”
However, smaller bins may give you the flexibility that's required to store identity-preserved crops. (See “Eyeing IP storage,” page 14.) “When you see a need to separate different types of crops, it may be helpful to have a number of smaller bins because you could end up storing a lot of air with bigger bins,” says Marvin Paulsen, University of Illinois agricultural engineer.
You may wish to separate genetically modified (GM) corn from non-GM corn, for example. “It's foolish to assume that you won't be affected by the GM issue in the next few years,” says Warren Odekirk, grain systems technical manager for Growmark, Bloomington, IL. “You may get a premium for just plain old number two non-GM corn. Identity preservation and identity tracking are issues that we've never faced before.”
Bill Wilcke, University of Minnesota extension agricultural engineer, explains that it also may be easier to monitor grain quality when the crop is stored in smaller bins. You can detect storage problems, such as mold, more quickly in small bins than large ones, he says.
However, technology can help you keep tabs on grain in larger bins. “As the bins get larger and there is more interest in value-enhanced grains, we have seen a resurgence in temperature cables,” Odekirk says. These tools help monitor grain quality in large bins by detecting hot spots.
Before you buy…
Thinking about starting a storage system from scratch? The number of farmers who do so is surprising, says Bill Wilcke, University of Minnesota extension agricultural engineer.
“Part of that is due to the consolidation of farms,” Wilcke says. “But some farmers also tell me that their facilities never really matched their farms. People also have really increased their harvest capacity, but have not increased their ability to dry and handle grain going into storage.”
Changing crop patterns also prompt new storage systems. For example, North Dakota farmers now plant more corn and less small grain.
“That has really changed the handling requirements that farmers have,” says Ken Hellevang, North Dakota State University extension agricultural engineer. “All of a sudden, farmers have gone from a small grain crop yielding 50 to 70 bu./acre up to corn that might yield between 150 to 200 bu./acre.”
Here are some buying tips we rounded up from the experts on how to create a storage system that will meet the needs of your operation for years to come.
Don't skimp on the site “The construction of a concrete foundation might require an extra $500 or $1,000 of steel or concrete,” says John Gnadke, president of AGS Incorporated, an Ankeny, IA, storage consulting firm. “But that's inexpensive when you amortize it out over 30 years. The site should be built with a long-range plan to meet the challenges of tomorrow.”
Don't assume that bigger bins cost less “That's true up to about 60,000 bu.,” says Warren Odekirk, grain systems technical manager for Growmark, Bloomington, IL. For example, a 50,000-bu. bin may be cheaper on a per-bushel basis than two 25,000-bu. bins. “But when you make the jump to commercial storage of 60,000 bu. or more, the cost per bushel goes up,” Odekirk says.
Foundation expenses loom large with commercial capacity bins. “A 100,000-bu.-capacity bin sits on a foundation that often costs $30,000 or more,” Odekirk says.
Storage costs aren't the only thing to consider when purchasing a bin. Crop type, local grain marketing alternatives and storage flexibility also are factors.
Install fully perforated bin floors “By moving the grain off concrete, moisture won't seep into the corn,” Gnadke says. “If moisture ends up in the grain, you'll not only spoil grain, but also encourage the resident bug population. When the grain is above the ground, it's so much easier to control its moisture.”
Buy a dryer with low temperature swings To ensure optimum quality, dryers should have just a 5- to 10-degree temperature variance, Gnadke says.
“High-quality grain cannot tolerate the 30- to 50-degree swings during drying,” he adds. Excessive heat that spurs stress cracks in corn can ultimately dissolve premiums for high-value grains.
Install a storage system with easy clean-out Identity preservation makes this quality paramount. “Tests can now sense one genetically modified kernel out of 800, so it's important to separate grain,” Odekirk says.
Buy conveyors, bucket elevators and pits that easily clean out, says Marvin Paulsen, University of Illinois agricultural engineer. Pneumatic grain handling units particularly fulfill this goal, because they are self-cleaning.
“Pneumatics are convenient and good for moving low volumes of grain,” Paulsen says. “But if you have to move a lot of grain, remember that they also have the highest energy costs per ton of grain moved.”
Consider energy costs High energy prices will likely impact drying practices this fall, particularly if the season is wet and cold. If LP prices stay high, some farmers may shift toward natural air drying, says Bill Campbell, South Dakota State University extension agricultural engineer.
“Electricity prices haven't risen as high as other forms of energy,” he adds. “If we see these fossil fuel prices stay up where they are, we may see lots of interest in solar or renewable energy.”
Hellevang advises farmers to install energy reclaimer units on dryers. “This enables you to catch and reuse the heat, rather than letting it escape into the environment,” he says.
Devise a versatile drying strategy If energy prices remain high, you may want to incorporate natural air or other low-temperature drying techniques this fall. Still, if you revamp or start a storage system, you will need to have a high-temperature dryer, particularly if you farm in northern areas.
“In this area, lots of corn is harvested in late October or early November,” Hellevang says. “Those cold temperatures make it difficult to use natural air or low-temperature drying. To assure they can dry in the fall, farmers should have a high-temperature dryer.”
With this tool, you can mix and match drying needs. If you need to quickly dry corn, you can use high-speed drying. You can also use dryeration or in-storage cooling to preserve quality of high-value grain.
“A systems approach is better than drying all grain in the dryer, since it gives you flexibility,” Hellevang adds.
Bankruptcies aren't pleasant experiences. But troubles for some can spell opportunities for others.
With his family, Bob Wietharn, a Team FIN member from Clay Center, KS, bought a local bankrupt elevator in 1992. The elevator was loaded — a 500,000-bu. storage capacity, two 4,000-bu. grain legs, a drying facility, eight bins and a scale.
Even though they bought the bankrupt elevator for 10 cents on the dollar, Wietharn says the deal was questionable for several years. “Everyone around here thought we were nuts,” he says.
In recent years, though, the purchase has paid for itself several times. Wietharn says, “The scale [now] is worth as much as the price we paid for [the whole elevator].”