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New Spurt in Grain Storage

August 31, 2011
By: Ed Clark, Top Producer Business and Issues Editor
DougRoth2
Grain farmer Doug Roth of Harrisonville, Mo., views the elevator he purchased for storage as a profit center as well; he sells high-quality corn to a pet food company and feed to a poultry plant.  
 
 

Capacity increases create more market opportunities

Nothing short of a rebirth in grain storage capacity is occurring throughout the heartland, and the growth spurt is creating new marketing opportunities for producers.

"This is an exciting time in the grain industry," says Joe Taets, president of the Grain Group for Archer Daniels Midland Company (ADM), Decatur, Ill. Taets says ADM is boosting its grain storage capacity in key crop-growing regions of the world as part of its strategy to accommodate increased production.

As of early summer, ADM had made announcements to build four new elevators in the U.S. in geographical regions where the company has a limited presence.

In addition, the company is adding storage to existing facilities and continues to look for expansion opportunities at both existing and new locations, Taets says.

Like ADM, Cargill AgHorizons is a company on the move to grow its storage capacity. Cargill is investing $25 million at its Hales Point, Tenn., grain elevator in a major modernization project. In addition, Bunge North America announced plans in April to build a new facility along the Mississippi River in a Fairmont City, Ill., joint venture.

"We’re seeing a boom in commercial grain storage capacity, with all kinds of construction going on," says Tom Tunnell, president and CEO of the Kansas Feed & Grain Association. In his view, more growth has occurred within the past five years in his state than at any time since the 1950s.

From February 2008 to February 2011, U.S. commercial grain capacity volume increased 15.6%, with nearly half of the increase taking place from 2010 to 2011 alone. During the past year, volume grew by 7.3%, according to data from USDA’s Farm Service Agency.

Looking at key states from 2008 to 2011, Nebraska posted 36.6% growth; Illinois, 21.5%; Kansas, 11.7%; and Iowa, 10.9%.

Storage Upgrades. The boom in capacity is occurring at all levels: from the largest multinational grain companies, such as ADM, Bunge and Cargill, to co-ops and country elevators, to large grain growers who are buying their own grain elevators in order to have sufficient storage and the opportunity for new profit centers (see the "More Producers Buy Elevators" sidebar on page 26).

On the supply side, grain officials see two reasons for the increase: a ramping up of storage as crop yields continue to increase due to new seed varieties, and the replacement of inefficient elevator flat storage.

"A significant portion of grain storage capacity was constructed a generation ago and needs to be replaced or expanded," says Mike Hechtner, Central Region president for CoBank, a Denver-based agribusiness lender. Hechtner says that co-ops funded by CoBank are increasing their storage capacity.

Another important reason for storage increases is that grain stored on the ground has become a year-in, year-out occurrence. New grain harvesting equipment also is allowing farmers to get crops out of the field faster and to elevators quicker. This has created a need for elevators to be able to unload trucks faster.

"There has been a bit of a bottleneck," Hechtner adds. "We have to get producers in and out. Speed is a major reason behind the growth."

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FEATURED IN: Top Producer - September 2011

 

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