Do the math before adding more grain storage

Having more grain storage can be a big plus, but it’s not a slam dunk, says a market analyst with Alberta Agriculture and Forestry.

“Farmers in Alberta along with growers in other Prairie provinces have more grain storage than most of their worldwide competitors,” said Ryan Furtas. “However, having storage capacity can be a marketing advantage, but capturing a higher price by storing grain is not a guarantee.”

Prices are seasonally lowest at harvest time because supply is high and so is the pressure on the grain-handling system.

“Customers who utilize grain, oilseed and pulse crops tend to require a consistent supply over the entire year,” he said. “Storing grain short term — three to four months — or longer term — 10 to 11 months — following harvest can improve producer returns and allow farmers to provide product at times when deliveries are otherwise slow.”

Both canola and wheat, the province’s two largest crops, have futures markets for price discovery. But others — including durum, barley, flax and field peas — don’t, and can be subject to more extreme price swings. Sometimes these crops can remain in storage for more than a year as producers try to wait out market downturns.

The actual cost of storage is more than just the purchase price for the grain bin. Setup costs can be significant if it includes a concrete floor, temperature monitoring system and aeration. Annual depreciation needs to be considered along with repairs and maintenance, and that can amount to an annual cost of upwards of 25 cents a bushel, said Furtas.

Moreover, grain bin prices have been steadily climbing over the last five years, he added.

In 2015, the cost of a 5,000-bushel bin was about $3.80 per bushel. That increased to $4.80 per bushel in 2020.

“Steel, both corrugated and smooth walled, grain bin prices are driven by both market demand and steel prices,” he said.

And demand in Alberta has been strong.

According to Statistics Canada’s July 2020 survey, Alberta producers have approximately 27.5 million tonnes (just over one million bushels) of permanent on-farm grain storage capacity, compared to 25 million tonnes just five years ago.

“The Statistics Canada report also states that approximately nine per cent of reported grain stocks using temporary on-farm storage such as grain bags,” said Furtas.

Still, “the overwhelming preference” is for permanent storage.

“It boils down to each individual’s situation,” he said. “Generally, permanent storage is preferred to maintain grain quality and for the ease of use.”