Without storage options that are closely linked with transportation channels, marketing choices, grain quality and the stability of the grain supply chain are all at risk. At a projected 14 million bushels, corn is the driver of the storage boom.
Bin building boom strengthens the grain supply chain
Like shiny beacons of prosperity, grain bins and elevators are as indispensable to the grain supply chain as a water tower is to a small town’s water supply. Both secure their valuable contents until needed and guard against scarcity.
In the world of commodity supply and demand, storage has served as an effective risk management buffer, allowing for carryover for year-round buying and selling opportunities.
Having a secure network of on-farm and elevator grain storage is more important than ever with increased global uncertainty from political unrest and foreign currency swings. Not to mention, there are new markets waiting to be tapped.
"As a farmer, you can be the best agronomist, producing good yields, but if you have trouble marketing your grain, it’s awfully hard to stay in business today," says Doug Niemeyer, vice president and general manager of Brock Grain Systems, a division of CTB, Inc.
That marketing picture includes the year-round selling and buying opportunities derived from having a scalable grain storage system, another piece of the field-to-port infrastructure puzzle. It is also part of the American agriculture success story—one that includes the production, merchandising and transport of 500 million tons of perishable grain per year, according to USDA.
"We are stubbornly optimistic about the ability of the global food and agriculture industry to meet future grain needs," says Erick Erickson, special assistant for planning and evaluation at the U.S. Grains Council (USGC). Erickson refers to new USGC research that looks at global demand in Asia through 2040.
"Demand will grow phenomenally and the markets will respond. There will be a huge surge in the number of middle-class consumers in the developing world that will want to improve their diets with meat protein," he adds.
Erickson says the U.S. share of exports has seriously eroded in the past two years. "For the first time, the U.S. has fallen below 50% of the world market share for corn."
Tight global stores, two short domestic corn crops and demand for corn-based ethanol production have combined with growing global food demand to drive corn prices to record-high levels in 2011. The high prices have encouraged competitors such as Argentina and Ukraine to expand their sales and have motivated corn importers to look for low-cost alternatives, driving down the U.S. market share.
Both global and domestic demand is creating the storage boom, and "corn is the overwhelming driver of grain storage," Niemeyer adds.
Research group Informa Economics estimates the 2012 U.S. corn crop at 94 million acres, producing a record 14.1 billion bushels. In the Southern states, corn acres continue to increase due to the historic shift from cotton to corn, says Tom Gettings, technical expert at Grain Systems Inc. (GSI). "These are new markets for storage that have never seen chain-loop systems and green field storage setups."
On a national scale, USDA reports that 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.
Ethanol and upgrades. Price pressure from government-induced ethanol mandates that went into effect in 2007 created corn demand and storage needs almost immediately.
- January 2012