For almost 20 years, Chris Finck, CEO of Show-Me Shortline, has sold grain baggers, and he says when two conditions are in alignment, it’s the perfect use case for alternative storage.
“It comes down to available storage in the country side and price—in tandem, when storage availability is low and prices are low,” Finck says.
This harvest Jeff Kazin bought his first bagger. Kazin is co-founder of Agris Academy, an education company focused on merchandising and futures best practice. As a farmer himself it was easy to justify how bagging grain added to his bottom line.
“The market is giving us a unique opportunity to pay for a bagger in one year,” Kazin says.
He gives the following example:
- The carry in the futures market from Z/H; December to March is $0.18
- Basis improvement Oct/Nov to January $0.35 SW Ohio
- Gross carry $0.53 for 3 months
Less
- Bag cost + labor $0.08 per bushel
- Variable cost to carry corn on farm interest and shrink $.08 for 3 months
- Net carry earnings equal $0.37 or every 100,000 bushels bagged would net $37,000
“There also some substantial freight and direct marketing opportunities in bagging. Think like a grain elevator—because your bins, legs, and trucks give you similar resources.,” Kazin says. “In this scenario, invest $3.60 per bushel and earn $.31. That $.31/$3.60 equals 10.2% return for three months. Annualize a multiplying by four, and you get 40.8.% annualized returns.”
Finck says he tells farmers they can buy a grain bagger and unloader for about the equivalent of a new 1000 bu. auger cart.
“Grain baggers allow you to hold for six months and at least capture carry—possibly some price rise as well,” Finck says.
Kazin reminds farmers they don’t earn a carry until they lock down the forward futures and basis.
“I have often had a grower tell me they are earning the carry-on grain stored on farm only to find out they have not locked down futures or basis for future delivery. You have to pick your spots as part of a comprehensive risk management game,” Kazin says.
Logistical Advantages
As elevators fill up and deferred pricing options dry up, alternative storage offers the additional benefit of keeping the combine running.
“In high volume crops like this, baggers are loaded right in the field, and the combine keeps moving,” Finck says.
He also highlights that oxygen free storage in a grain bag has zero shrink.
“If you put the corn in at 15%, you’ll take it out at 15%,” Finck says.
As for where to set the bags, Finck advises they are in the open—not near a tree line—and somewhere easy to inspect at least once a week.
“There’s a lot not in the farmer’s control, but grain baggers are something they can put into their operation now that provide an easy way to take care of the current challenges,” Finck says.
