September 7, 2007
Weighing Grain Storage Options
As yields increase and more grain is produced, there is an increasing need for grain storage options. Nebraska's total corn production for 2006 was about 1.18 billion bushels with an average yield of 152 bushels per acre. In 2007 it is projected that Nebraska will produce 1.46 billion bushels of corn with a yield of 168 bushels per acre. Storage is utilized because it allows the producer or the owner of the crop to have more flexibility concerning the date the grain is delivered and the price strategies used.
A number of Nebraska elevators were contacted recently to assess the storage situation and options available to producers. Elevator representatives said they commonly run out of storage space and that more was needed in the state. Some producers use different forms of storage instead of renting elevator space, such as using or renting on-farm storage or investing in new "condominium" storage space. Each of these choices/options has advantages and disadvantages.
The traditional and most common option used by producers is the on-farm investment in storage facilities. On-farm storage is convenient and provides flexibility for when crops are sold. Another convenience is that grain can be loaded or unloaded at any hour, day or night, unlike with commercial elevators. Options for increasing on-farm storage include building a new facility or using an existing building not specifically designed for grain storage. A building might not be as efficient as a grain bin, but it can provide a low cost solution. When deciding whether to build on-farm storage, consider capacity of the proposed storage, cost of construction, and other potential uses of the storage space.
Another way producers can store their grain is by renting available storage from other producers or landowners. Once again the hours for access are more flexible than with an elevator and rent may be more feasible than the cost of constructing a new facility. With this option the owner of the storage bin needs to develop a written contract that outlines the renter's obligations. By creating a contract both the owner and producer know what's expected. Maintenance of the storage facility, time the contract will be upheld, price of storage and any extra expenses such as electricity should be covered in the contract.
Many Nebraska producers have agreements with local elevators to rent storage space. A different concept or option is the idea of condominium storage space. Condominium storage is a practice where the producer owns or leases space from a licensed primary elevator. Not many elevators in Nebraska offer this option, but it is becoming widely used in Canada and other parts of the country. A producer forms a contract or an agreement with the elevator which could include: when the space can be sold, maintenance fees, and other items of business that need to be clarified.
Some elevators have specified 20 years for the length of condominium storage and may include an exit clause. Usually the elevator maintains the storage facility and the producer can sell the grain crop whenever they choose. While the producer can control when they sell, a disadvantage to this method is that they can't control who they sell to - they have to sell to the elevator. The producer provides a portion of the funding and when the agreement has expired, the elevator can buy the facility from the producer; this would provide more storage space for the elevator.
Extension Farm Management Specialist