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Farm, commercial grain storage business strong

 

By SUSAN BLOWER
Indiana Correspondent 

SHEFFIELD, Iowa — A shortage of grain storage – both on and off the farm – is keeping manufacturers busy contracting for new grain bins.

"It has been a steady trend on both the farm and commercial sides of the business," said John Hanig, bin sales director for Sukup Manufacturing Co., based in Sheffield, Iowa. "There’s definitely a shortage of storage."

Hanig estimated that Sukup grain bin sales have increased by 10-20 percent every year since 2001, when the company first began manufacturing them. Sukup also manufactures grain dryers, material handling equipment and pre-engineered metal buildings, which are sold worldwide.

Dirk Maier, grain storage specialist with Kansas State University, said bin manufacturers and millwright companies are having trouble keeping up with demand.

"They have contracts they are working to fulfill. If you order today, it may not be in time for the wheat harvest. It may be in time for the fall harvest," Maier said.

Maier said that farmers increasingly are utilizing more on-farm storage.

"There’s no question that on-farm storage has been increasing fairly steadily. Grain bins are larger. Farmers are taking more responsibility for the timeliness of their (sales). Their system is also set up to maximize time in the field at harvest," Maier said.

According to USDA’s grain stocks report for 2015, off-farm commercial grain storage capacity in the U.S. totaled 10.7 billion bushels, up 2 percent from the previous year. On-farm capacity totaled 13 billion bushels, up almost 1 percent from the year before.

Also, a sharp increase of on-farm grain storage was charted between the 2007 and 2012 Ag Census reports, an increase of nearly 445 million bushels, while total farm numbers declined by about 46,000 operations. (beefmagazine.com)

Consolidation of farms and larger yields have contributed to newer, larger grain bins, translating into market power for farmers as never before. Large, state-of-the-art grain bins on the farm now rival some of their commercial counterparts, Hanig said.

"When the corn is in your hands, you’re in the best position. Farmers know they can then sell when the spikes in the market are big," Hanig explained.

Bigger market swings in recent years only make the decision of when to sell more crucial, Hanig said.

Maier said that the stakes are also higher for farmers who are storing larger quantities of grain.

He emphasized the need to manage grain storage with care.

"Bins are larger. Five-hundred thousand bushels of soybeans at $5 per bushel is $5 million," Maier said.

Maier, a former professor with Purdue University, said that Purdue and Kansas State offer the same best-management principles to maximize on-farm grain quality. (For more on these principles, see story on page 12.)

Science is doing its part to help the farmer, Maier said. Kansas State is studying potential improvements in grain storage technology, such as new artificial cooling systems and non-chemical pest control.

In the Corn Belt, 70 percent of available grain storage is on the farm with 30 percent at commercial facilities, whereas on the Great Plains, that percentage is flipped, Maier said.

The state-by-state numbers seem to back that up. In Indiana, for instance, 380 off-farm facilities house 510 million bushels in capacity, while on-farm capacity is 830 million bushels, according to USDA. But in Kansas, off-farm capacity is 1 billion bushels at 715 facilities and on-farm capacity is 380 million bushels. (www.ngfa.org)

Corn farmers have a bigger incentive to build on-farm grain bins, Maier explained, while farmers growing wheat in the Great Plains are troubled by insect problems during storage; and therefore, commonly use commercial facilities.

But if more bins are being built each year, won’t supply finally meet the demand for storage?

Hanig is not worried about the future of grain bin sales. He said he does not expect sales to level off.

"I don’t see that happening. If you look at what the seed companies are predicting, we could double our harvest from 200 bushels per acre to 400 bushels of acre. With the way technology in chemicals and fertilizer is also advancing, there’s going to be a need for more storage," Hanig said.

Also, Hanig said that the development of drought-resistant corn means more states like South Dakota can grow corn. Whether that is a factor or not, the largest increase of off-farm grain storage in the United States was in South Dakota last year, where an extra 35 million bushels of capacity were added since December 2013, according to USDA figures.

Other notable increases were in Indiana, increasing by 31.3 million bushels, and Iowa and Minnesota, both up 30 million bushels from 2013 in off-farm storage.

Illinois and Iowa remain the two largest off-farm storage capacity states with 1 billion bushels each, followed by Kansas, Nebraska and Minnesota. The five states account for 52 percent of the nation’s off-farm storage capacity.

The USDA considers off-farm grain storage to include elevators, warehouses, terminals, merchant mills, other storage, and oilseed crushers. U.S. off-farm storage facilities total 8,701 with a capacity of 10.7 billion bushels.

On-farm grain storage capacity in the United States totaled 13 billion bushels last year. Iowa continues to lead all states with 2 billion bushels of on-farm storage capacity, followed by Minnesota with 1.5 billion bushels.

Other major states include Illinois with 1.45 billion bushels, Nebraska with 1.18 billion bushels, North Dakota with 880 million bushels and Indiana with 830 million bushels of on-farm storage capacity.

These six states account for 60 percent of the nation’s on-farm storage capacity.

The USDA considers on-farm storage to include bins, cribs, sheds and other structures that are normally used to store whole grains, oilseeds, or pulse crops. (www.usda.gov/nass/pubs)

5/21/2015