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Storage Still Strong

September 5, 2013
By: Jeanne Bernick, Top Producer Editor
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Bin building reaches capacity, but demand stays tight

The potential for U.S. crops is titillating to anyone in the grain storage business. If a 4-bu.-per-acre-per-year increase in corn yields hold true, by 2035 more than 14,000 105-diameter steel bins, which hold up to 650,000 bu. of corn, would have to be built to store the additional grain.


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"The construction rate has to continue just to have a place to put the corn when it comes out of the field," says Charles Hurburgh, Iowa State University agricultural engineering professor. Corn yields have increased from 75 bu. per acre in 1970 to about 150 bu. By 2025, it could be 230 bu. per acre, Hurburgh says. All this means continued demand for bins and grain-handling equipment.

An increasing emphasis on food safety makes it likely that any old methods of storing grain on the ground will be phased out. It’s too expensive for farmers to cut corners and lose grain to mold.

"Outdoor piles are a thing of the past," Hurburgh says.

The market for used grain bins, carts and other grain-handling equipment has remained on a steady rise since the boom of the ethanol market, notes Greg Peterson, who writes the Machinery Pete column in Farm Journal and Top Producer. (See chart below.) His analysis spotlights sustained high used-equipment values since 2007, with a little dip last year and another dip in the second quarter of 2013.

"Even with all the new grain bin capacity that’s been built during the past several years, there is still an overall strong used market," Peterson says, noting that the same is true with new and used grain carts and grain trailers. "It’s just not as red hot as it has been."

In the Corn Belt alone, billions of dollars must be invested in storage to handle 2.3 billion more bushels of grain by 2019, according to Dan Kowalski, lead analyst at CoBank’s Knowledge Exchange Division.

More than half of the extra storage is expected to be built off the farm, costing an estimated $3.8 billion, notes a CoBank report titled "Change on the Rural Horizon: Managing the Expansion of Grain Storage in the Corn Belt."

grain equipment value

Bin Building Hot Spots. Most of the projected storage will be built in Illinois, Iowa and Nebraska.
The report estimates that roughly 80% of U.S. grain storage capacity is located within the 12-state Corn Belt region. Since 2005, this region accounts for 90% of the new grain storage capacity. Off-farm storage accounts for 42% of Corn Belt capacity. Its share grew nearly twice as fast as on-farm storage.

This suggests that many farmers are opting to take on less risk and less leverage by utilizing elevator storage, according to Kowalski.

The average commercial grain storage facility has grown by 30% since 2005. Even before 2005, the grain storage business model was shifting toward larger systems encompassing multiple counties. Continued success is dependent on the industry’s ability to offer sufficient storage in optimal locations, faster and newer technology and competitive rates.

Bigger, Stronger, Safer. There is a general increase in demand for silos of bigger capacities, not only for farmers, but also for traders, feed millers and breweries.

This year, Grain Systems Inc. (GSI), a global brand of AGCO, introduced the GSI 40-Series bins with the new Z-Tek Roof System, which can accommodate large grain-handling equipment while reducing the need for additional structural towers to support weight. The added strength allows customers to move more grain faster, cutting time for unloading trucks and filling the bin.

The 40-Series is designed for large farms and commercial grain-handling operations and offers capa­city of 7,000 to 1.2 million bushels.

Sukup Manufacturing Co., the fastest-growing bin manufacturer, celebrates 50 years of business with its largest product line. Sukup now makes farm and commercial grain bins, portable and tower dryers, fans and heaters, stirring machines, unloading equipment and bin floors and supports. "We’re positioned well for 2013 with our full line, including the largest free-span bins, large dryers and new steel buildings," says president Charles Sukup.

The industry can expect greater flexibility in storage and a wider range of products with features such as larger entry doors, walk-through doors and crawl doors. 

A new factor in storage innovation is the Food Safety Modernization Act. Hurburgh says the Act gives the Food and Drug Administration broad power to inspect and monitor grain-handling facilities. Storage and drying are considered part of the supply chain, he says, and eventually farmers could get questions about cleanout of bins and management.

The value of the grain stored in a 25,000-bu. bin is about $175,000 at a corn market price of $7 per bushel, $350,000 for soybeans at $14 per bushel and $200,000 for wheat at $8 per bushel.

"At those prices, monitoring and managing stored grain to prevent problems are worth your time," adds Ken Hellevang, North Dakota State University agricultural engineer.

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FEATURED IN: Top Producer - September 2013

 
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