January 15, 2025

Answers are from the Profit Planners panel: David Erickson, farmer, Altona, Ill.; Mark Evans, Purdue Extension educator, Elkhart County, Ind.; Jim Luzar, landowner and Purdue Extension educator, Clay and Owen counties, Ind.; and Steve Myers, farm manager with Busey Ag Resources, LeRoy, Ill.
Long lines and short hours at the grain elevator last fall really make me wish I had more on-farm storage. Is that something I can afford to do this year? Or should I hold off another year?
Erickson: On-farm storage is a large capital expenditure that involves both physical and financial planning. Interview and receive potential plans from one or more contractors who can discuss your needs and make valuable suggestions. Take time to determine your actual cost of commercial storage, including drying, shrink, storage and efficiency costs. Make your decision based on facts and consider a multiyear plan if necessary.
Evans: Do you already have on-farm storage that can be expanded at a more economical level? Are there other alternatives, like assets that are not being used that you could rent? How good are your grain marketing skills? Will additional storage help you market your grain better?
Grain storage may include both fixed and/or variable costs. No matter how much you use the asset or how long, you will have fixed cost. Variable cost will fluctuate. Depreciation schedules can help with the cost. Most grain storage assets are on 25-year schedules, though it would not be unreasonable to push that out to 30 years. If only storing grain for three to five months, often rented storage may be more economical.
Storage construction inputs have been extremely inflationary. My hunch is that there will be some flattening of the recent sharp increases, but I don’t see any deflation of these assets on the horizon. Therefore, if one has good location and favorable answers to the questions presented here, one could consider increased bin capacity a good investment to help offset near-term bearishness in grain markets.
Luzar: A wet fall, elevator downtime or poor-standing corn may make more economical justification of having a fall storage “safety valve.” Evaluate your options, which may include bagging some corn, a temporary setup of bin rings or some other method.
In contrast to the short-term feature of being in a “pinch,” realize that perhaps your harvest needs have changed and more space is needed. Basis levels were quite wide last harvest, and this seems to be a perennial issue in the fall. Storage investment is more than likely not going to get cheaper. If your operation has economies of scale, a larger bin may provide a reasonable return on your investment, especially with longer-term storage gain opportunities. Determine if you are dealing with a problem that will rear its head every few years or if this is a chronic condition that justifies a more permanent solution.
Myers: Do the math and use a partial budget that will help you analyze the return when looking at positives of reduced costs, like field loss or labor at harvest, and added returns, like carry in the market, specialty bushels, cheaper drying, no shrink on stored bushels and no elevator charge for stored bushels. Compare this to the negatives of added costs, like depreciation, interest, repairs, taxes and insurance, and reduced returns. Timing is tough to measure, but the math will give you an idea of what ROI exists and whether to move forward or stand pat.
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