By Clinton Griffiths, Chris Bennett, Sara Schafer and Margy Eckelkamp
On five days within a two-week span in March, Matt Splitter’s cellphone rang at 7 a.m., with flash sale offerings on fertilizer and chemicals. The retailer’s proposition on price and quantity was accompanied with a fastball down the middle: 10 minutes to make the decision or the offer bounces.
Splitter’s yea or nay requires cold, hard numbers on the fly. “If you’re not ready in the moment, it’s too late,” he says. “For me, it’s as simple as flipping open my computer and looking at my cost of production, what I’ve bought so far this year and my insurance guarantees. If that takes longer than 10 minutes, the opportunity is gone.”
Despite inflation and input chaos, opportunity is pounding on agriculture’s door in 2022, Splitter emphasizes, and the calculus of on-farm storage provides farmers with shelter from a schizophrenic supply chain.
“These crazy markets have solidified my belief I don’t want to lose control of anything if I don’t have to,” Splitter says. “Efficiency means ownership of grain or inputs.”
Other farmers are assessing the same math problems. Nearly 440 farmers answered an AgWeb poll showcasing the conversations happening across farm country:
What on-farm storage investments are you considering in the next year?
- Grain Storage: 36%
- Fertilizer: 15%
- Fuel: 15%
- Chemicals: 7%
- All of the Above: 27%
CAUTION: DISRUPTIONS AHEAD
The pandemic was the spark, and now every corner of the global supply chain is burning. From labor issues to transportation bottlenecks to rising inflation, the retailers and companies that keep spring planters moving are facing major disruptions.
For 2022, Michael Bierman, marketing manager at South Central FS in Effingham, Ill., knew product would be tight. As a result, farmers requested or took delivery of product months earlier than normal.
“Historically, they wanted to wait until past the cold weather and the freeze risks for taking product in totes,” Bierman says. “This year, they wanted every ounce, gallon and pound in their sheds.”
On his operation near Sterling, Kan., Splitter is an avid proponent of on-farm storage, particularly regarding liquid fertilizer and grain. A no-till producer, he favors liquid over dry fertilizer or anhydrous, and has storage capacity for just under half of his annual liquid needs. Splitter’s on-farm access to nutrient loads is crucial to overall efficiency.
“When we get all our systems going, we want to be at maximum efficiency,” he says. “We don’t have time to run to town to get a semi-load or wait for delivery. The inventory has to be on-hand.”
Splitter’s 10,000 acres of crops can churn through 200,000 gal. of UAN-32 each year — essentially 40 semi-loads.
“You don’t want to wait for 40 loads and hope they all arrive at the right time,” he says.
GIVE TANKS A TRY
Kingman, Ind., farmer Matt Martin recently made the same decision amid an agronomic adjustment from 20" corn rows back to 30". As a result, he adjusted his nutrient feeding program.
“We’d been using all anhydrous, and we decided to switch to 28%,” he says.
For efficiency, Martin added enough liquid storage for half of his annual nitrogen needs. Eight 30,000-gal. stainless steel tanks set on concrete stand 35' tall surrounded by a dike system and a loading pad, including pumps and agitators.
“We have 240,000 gal. of storage, and I wish we had a little more,” Martin says.
The planning began in 2020 before the supply chain scramble really took off. Martin took delivery in August at $300 a ton. Three weeks later the price was double.
“That system basically paid for itself in the first few weeks,” he says. “We can now buy in the offseason, when demand is low, at a significant savings.”
Brad Peas, co-owner of Agro-Chem, sold and helped install Martin’s system. While it depends on the system, he says farmers are seeing a rapid return on investment for liquid storage — just three or four years.
“We used to sell tanks seasonal and just to retailers,” Peas says. “Five or six years ago we started selling larger storage tanks to the end user, and now we sell large storage tanks 12 months out of the year.”
Martin is now adding 30,000 gal. of fuel storage and is weeks away from completing 2,000 tons of dry fertilizer storage. These are major investments, he says, which were easier to make thanks to the guidance of employees Andy Bradford and Clint Frodge, who both formerly worked in ag retail.
BUILD A BUYING GROUP
For farmers who might not be ready to pull the investment trigger, another solution can be a bulk buying group, says Jim Hedrick, general manager of Sagamore Ag Source. He says his customers can see $30 to $40 per acre savings on major inputs.
A buying group provides preferential access to a collection of farmers or acres, he says. Simplifying a big sale is often incentive enough for large companies to make price concessions.
“In today’s world, literally, everything is negotiable,” Hedrick says. “A lot of farmers, surprisingly, still don’t realize or feel comfortable doing it.”
Read More: Input Shortfall Solution: Build a Buying Group
AN UNCERTAIN FUTURE
Back in Kansas, as Splitter prepares for planting, he’s already discussing 2023 chemical and seed needs. At a bare minimum, he believes orders must be made six months in advance, as he sees an imminent convergence where inputs maintain or rise in cost, yet commodity prices drop.
“If the market doesn’t give us opportunity to buy inputs at a reasonable price, then 2023 looks pretty tough,” he says. “On the other side of the coin, if you sell 2023 grain today, and you’re able to lock in fertilizer prices and use on-farm storage, I still think profits are there to be made. Preparation and getting a spot in line are going to be critical in 2023.”
Make Smart Storage Decisions
Grain Storage: Control both time and location of grain sales while also optimizing harvest.
“The first thing we talk about is investing excess capital into grain storage and handling,” says Bret Oelke, farm management coach with Innovus Agra.
Instead of adding a third combine to his Kansas farm, Matt Splitter has expanded his grain bin and dryer system, which allows him nonstop harvest capability.
“These surging markets have solidified my belief I want to put every ounce of effort into maintaining control of my grain,” Splitter says. “Our grain bins don’t require anyone to be there. Our drivers dump and hit a button. Profit in farming is about creating efficiencies.”
Fertilizer: Liquid fertilizer is easier than bulk; both allow for purchase during off peak months.
Standard fertilizer tank options include polyethylene, fiberglass and stainless steel. Which one gets chosen usually comes down to price. Poly tanks can last up to 20 years, fiberglass 30 and stainless in excess of 50. Every state will have different rules about safety and diking requirements, says Brad Peas, co-owner of Agro-Chem.
“Overwintering UAN-28 is a better option than UAN-32 because of its freezing point,” he says. “Buying a smaller tank for micronutrient storage is also becoming a popular bulk buy.”
Fuel, Diesel and Propane: If you need fuel, buy it and balance out the variability in prices.
“Shoot to have at least half of your year’s diesel supply locked in,” Oelke says. “It doesn’t matter whether it is delivered or part of a program.”
If you handle a lot of corn and harvest early, propane storage pays. Take delivery of most or all of what you will need. Usually, it’s cheaper to buy in the summer. The rule of thumb is 1 gal. of propane will dry 7 bu. of corn, taking out 10 points of moisture.
Crop Chemicals: Aim to lower your chemical supply chain risk and qualify for bulk discounts.
“You typically need a heated shop to store chemicals,” Oelke says. “That’s not always an option, which is why it’s often last on the storage investment list.”
7 Questions to Answer Before Investments
Farm business consultants Bret Oelke and Ryan Bristle suggest using this decision tree when considering on-farm storage investments.
