Making sense of today’s grain storage options

There are more options for grain storage today than ever before, but which ones are best for your farm?

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Today’s grain storage is not like yesterday’s grain storage.

Not only are farms generally bigger, necessitating higher capacity for on-farm storage, but storage also plays a crucial role in crop producers’ marketing strategies.

It can also be expensive. According to provincial government data, grain bin prices have increased from $2.50 per bushel in 2004 to more than $4 per bushel in 2014 — the result of demand and an increase in steel prices.

Clearly, there is a growing need for economical and secure grain storage, especially in years when there’s a bumper crop. Although there are a number of options out there, the decision process can be overwhelming. there are a lot of questions, with a big one being whether a farmer should use permanent structures such as bins or more temporary solutions such as grain bags or rings.

From a long-term financial perspective, steel bins are the best choice simply because they’re resalable assets that are easy to use and are the best when it comes to maintaining grain quality, said Ryan Furtas, a market analyst with the Economics and competitiveness Division of Alberta Agriculture and Forestry. they are also the best choice for security and overall grain management.

However, this does not tell the whole story. Temporary storage has some distinct advantages as well, particularly for producers who have not yet developed a bin yard. but perhaps their greatest benefit is flexibility.

“In the fall, you can bag your grain right in the field without hauling it to a bin, if the bin is not already in the field of course,” said Furtas.

Know your needs

When people talk about permanent grain storage, they’re usually referring to steel grain bins which generally come in smooth-walled or corrugated steel varieties. Less common permanent solutions include storage sheds and farmer-owned elevators. temporary storage includes grain bags (which require an extractor to fit the bags around the grain), plywood or steel bin rings with tarps as well as bunkers and outdoor piles. of these, the most popular permanent storage options are steel grain bins and the most popular temporary storage are grain bagging systems.

When making storage decisions, understanding the long- and short-term needs of your farm is key, said Furtas. there are many things to take into consideration, including the size of the operation, distance of land from the storage area, whether the land is rented or owned, and even the age of the operator.

“Every farm situation is very different,” said Furtas. “Are you renting or do you own the land? Do you plan to get bigger or smaller? What’s your marketing plan and labour situation?

“there’s a big upfront cost to putting up a nice smooth-walled bin on concrete as opposed to some of the other options out there such as a bin ring.”

From a security, management, and long-term economic position, steel bins are the best way to store grain, he said.

In addition to offering the best protection from pests, wildlife, weather and theft, bins offer a wider range of management solutions (such as aeration and monitoring) compared to temporary storage. If well maintained, producers can generally expect their bins to have a life-span of 30 to 40 years.

“Bins give you access to your grain year round; there’s not much stopping you from hauling, whereas with temporary storage there are some barriers to hauling such as spring weather or just getting access to the field or wherever the bags would be,” said Furtas.

Because of their large upfront costs, the biggest risk of bins is financial. However, in cases where producers own the majority of their own land and are in agriculture for the long term, they are very good investments, said Furtas.

“Plus you have a salvage value and you can depreciate them the same way you do with your other farm assets. the downside is you might be paying some interest, which is money you’re not recouping.”

The type of crop you’re storing is also an important consideration when deciding between permanent and temporary storage.

“Storing grain in bags is typically a cereal thing — feed barley, feed wheat, that kind of thing,” he said. “I’m sure it happens, but you don’t typically see canola stored in bags. if your extra storage is for oilseeds or other higher-value products such as pulses, you’d probably want to look at investing in a steel bin.”

Extra capacity is key

But what happens when your harvest exceeds your storage capacity? Do you go out and buy a new bin?

Again, depending on the kind of grain being stored and a host of other considerations, temporary storage might be the answer.

“As you need it, it’s there,” said Furtas. “if you have a big yield you’ll have storage to handle that added capacity. the location is flexible. A lot of guys will just put it in the field they’re combining — you’re saving trucking costs at that point.”

Although tarps and rings cost little, grain bagging systems come with their own set of upfront costs — anywhere between $20,000 and $50,000 for a bagger, and between $40,000 and $50,000 for an extractor.

Whether it’s worth it depends on just how much extra storage capacity you need. Using the need for 25,000 extra bushels as a baseline, the Economics and competitiveness Division weighed the economics of buying a new grain bagging system against steel bins. (see graphic below)

Grain bagger cost curve. photo: Supplied

“For just 25,000 bushels the grain bagger and extractor — at 50 cents per bushel per year — is a pretty expensive option relative to what the bins would cost you over the lifespan of the bin,” said Furtas. “there are also moving parts on the bagger and extractor that require maintenance. there’s no such thing on a bin — nothing can go wrong with a bin in a lot of ways.”

However, grain bagging systems become more economical as the storage need exceeds 25,000 bushels. by 90,000 bushels, the cost of these systems comes down to 20 cents per bushel per year over a 15-year period.

“If you’ve taken on some new land and are expanding quickly, then the bagger makes a lot of sense. or maybe you’ve only got this land for five years and you don’t need all this upfront investment on bins.

“Once you’ve got the bagger, the only thing that really costs you when it comes to adding bushels is the bags and the cost of operating it. it’s basic economies of scale. Whereas if you have a 5,000-bushel bin, once it’s full it’s full.”

the Economics and competitiveness Division has prepared a report comparing the economics of several grain storage options. it can be found at www.agriculture.alberta.ca (search for ‘grain storage considerations’).

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