Farm Progress

Profit Planners: Run the numbers to decide if leasing or buying bins is best.

March 19, 2018

3 Min Read
3 OPTIONS: You need grain storage. Your neighbor won’t use these two grain bins. Should you buy them and move them, lease them on-site, or walk away and build one newer, larger bin?

We need more grain storage for corn. A neighbor who will retire after this year is willing to sell us his two 20,000-bushel bins. We can either do that and move the bins here, or leave them there and pay him rent. He is not going to use them this fall. How do you sort out renting vs. owning grain bins, and which is the best deal?

The Profit Planners panel is: David Erickson, farmer, Altona, Ill.; Mark Evans, Purdue University Extension educator, Putnam County, Ind.; Steve Myers, farm manager, Busey Ag Resources, LeRoy, Ill.; and Chris Parker, forage and livestock producer, Morgan County, Ind.

Erickson: If the bins are in good condition and the location is acceptable and provides easy access, renting could be a more cost-effective approach. You would not have the expense of a full purchase, and rent costs would be an annual expense item that should be more manageable. Be sure you know the cost of new bins so you can make an informed comparison.

Evans: Location-wise, how do these two bins fit with your own farming operation? If you move them, what adaptations would be needed to accommodate the two new bins? If the two bins are metered for power separately and the property tax for the land and the two bins is minimal, leaving the bins where they are now would not have significant cost to the current owner, unless there was an alternative use for the land. I hope that an arrangement could be worked out where one could reasonably lease the land where the bins reside for a longer term than if the bins were purchased and not moved.

Myers: Think long term as you work in the short term. Do you want these bins for the next 40 years? Will they seamlessly integrate into your current setup of rotations and sites while allowing for future additions? Would you be better off with one 40,000-bushel bin instead of two 20,000-bushel bins? From a financial standpoint, a partial budget comparing added costs and reduced returns against added returns and reduced costs may help in this consideration.    

Parker: Without delving into moving costs, of which I am uncertain, I would think leaving them in place and renting would be the way to go if they’re reasonably accessible to your overall farming operation. There are some distinct advantages to having some of your core infrastructure physically separated, especially in case of a disaster such as fire or tornado.

According to the 2016 Ohio Farm Custom Rates bulletin, average cost to rent bin space would run 4 cents per month or 24 cents per year of use time. Both are negotiable, of course. If you went month by month, cost for 40,000 bushels of storage would run $1,600 per month at full capacity, reducing every month as you marketed your corn after harvest. Renting them on a yearly basis would be half as much and make more economic sense in most scenarios. To me, this would be the way to go for a few years while you explore the cost and labor involved in moving them in relation to your overall farm business plan.

Summing up: Whether you buy bins, rent them or pass altogether depends on your future needs for grain storage. Do your homework on rental rates for grain storage, and compare potential costs and returns in what-if scenarios before deciding. — Tom J. Bechman


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