LOUISVILLE, Ky. — As hundreds of thousands of National Farm Machinery Show (NFMS) enthusiasts made their way through the thousands of equipment and product exhibits earlier this month, many also found valuable information for their farming operations.
One stop for row crop growers was the Grain Systems, Inc. (GSI) exhibit where a new return on investment (ROI) calculator demonstrated how farmers can earn significantly more by storing their grain on-farm and marketing it at a future date, compared to selling it at harvest.
The volatile grain market has caused many producers to rethink what to plant and how much, and record yields coupled with low prices have forced them to look for storage options both on-farm and off. Investing in on-farm storage can be expensive, however, and for a lot of growers it becomes a balancing act between money invested and money made.
The ROI calculator can help farmers who are considering putting in more on-farm storage grain bins by showing them how long it will take to recoup their investment. It is based on additional revenues they earn due to market carry, said Tim Davis, GSI director of sales for eastern North America. "Last summer when we saw this big crop coming on, and we felt like the carries were going to widen because that’s what happens when you have big crops, we started going out and doing grower meetings with some of our dealers to try and help farmers understand that if they put a bin up by the time harvest got here, it would pay for itself rather quickly," he explained.
Based on the success of those discussions, Davis said a Web-based calculator was created that would allow growers to key in certain information and get a real-time idea of how long it would take to pay for an on-farm bin in relationship to the pricing information. "What this does is help the farmer see what would be the return on investment," he said. "I think, in my mind, most farmers understand that adding space to their farm will make them money over time but they maybe don’t make that decision – but if they see the specific numbers for their farm it could be the thing that gets them over hump to say, ‘Yes, let’s put that bin up.’"
Example information from GSI stated: "Grain marketing consultant Adam Dryer of Blue Reef Agri-Marketing, Inc. in Morton, Ill., estimates the combination of basis appreciation and market carry could generate a premium of 45-50 cents per bushel of corn harvested and stored on-farm in mid-October 2014 and contracted for delivery in July, 2015."
Davis said the calculator is very high-level but simple to use. It will calculate other crops besides corn, including soybeans, rice, canola and wheat. Farmers can email or print the results from the calculator. Gary Woodruff, conditioning market specialist for GSI, said another good reason to have on-farm storage is it gives producers more control over their harvest schedule.
"Having 24/7 access to their own storage equipment also increases profit potential by making harvest more efficient," he said. "On-farm grain storage enables farmers to harvest when conditions are optimal, minimizing the risk for grain damage and yield loss by allowing their crop to dry down too long in the field."
GSI has made the calculator available for free on its website at http://roicalculator.grainsystems.com or to be downloaded as a smart phone or tablet app.
Davis said being able to add 30, 40 or 50 cents to the operation is going to be more important as profit margins become tighter. "I think this has come at an ideal time for growers to be able to calculate this, and hopefully helps them make the decision to build the bin and have that space," he added.
