Source: Alberta Agriculture and Forestry, http://www.agric.gov.ab.ca/
Reports from earlier this summer suggest that Western Canadian producers are on pace to have larger than average grain carry over into the 2018-2019 crop year. Ryan Furtas, input market analyst with Alberta Agriculture and Forestry, breaks down the findings from this year’s Grain Storage: Considerations report and what producers should consider when looking for more grain storage.
“On farm grain storage is essential for most Alberta cropping operations and has become a higher priority in past ten years due to record crop yields and higher commodity values,” says Furtas. “Keeping grain and oilseed in good condition allows producers to employ marketing strategies that serves them best, such as storing over the short term to avoid seasonal pricing. According to Statistics Canada, over the past 3 years Alberta farmers have constructed an additional one million bushels of permanent grain storage, which demonstrates the importance of growing on farm storage capacity.”
Producers need to consider their entire operation when deciding to invest in grain storage, including the size of the operation, distance the land is from the storage area, age of the operator, and whether the land is rented or owned. “Permanent storage provides piece of mind that grain is protected from weather and wildlife damage,” notes Furtas. “It includes steel grain bins, sheds, and some instances of old elevators. Temporary systems are excellent for short term storage and primarily include grain bags, grain rings, bunkers, or open piles. The most commonly used systems in Alberta are grain bins and grain baggers. When comparing bins to bags, grain bins are more economical when storing smaller volumes of grain.”
Pricing of grain bags becomes more competitive when storing larger volumes of product on an annual basis. Explains Furtas, “Based on the pricing used in the report and assuming the producer has no storage bias, 70,000 bushels was needed to be stored per year before bags were more economical than bins. Factors such as lifespan, the cost of the system, depreciation, salvage value, repairs and maintenance, interest, and spoilage need to be calculated to make a fair comparison of each system.”
The report features a price comparison based on requiring an additional 25,000 bushels of storage. The analysis includes several economics factors such as depreciation, salvage value, interest on investment, maintenance, and set up costs.
“The example shows that grain rings are the most economical solution for grain storage, coming in at $0.10 per bushel,” says Furtas. “However, it is likely the least desirable system as it represents an increased work load for the farm, and a higher risk for grain loss.”
Grain bins are the second most economical option coming in at $0.24 to $0.27 per bushel. The smooth walled hopper on concrete represents the more expensive end of the price range, compared to a corrugated steel on a flat bottom or corrugated steel on hoppers. Explains Furtas, “The higher cost is due to a large initial investment and extra interest, but it also represents the least amount of risk of grain loss or spoilage and possess high salvage value.”
The grain bagging system is the highest cost for adding 25,000 bushels of storage, coming in at $0.58 per bushel. “This is due to the high investment cost for the bagger and extractor along with a higher depreciation rate resulting in lower salvage values. Since grain bagging systems have unlimited storage capacity, the cost per bushel over the lifespan of the asset decreases the more bushels being stored. As mentioned earlier, grain bagging systems become competitive with bins at the 70,000 bushel mark,” explains Furtas.
“Grain storage considerations are expensive decisions for farms to make,” adds Furtas. “Deciding on which storage option to select can be complicated and dependent on the needs of the individual operation. The aim of the report is to help with planning and research to select the right storage option for the farm business operation.”