30 Days on a Prairie Farm: Store Grain

My Generation

Day 16: Farmers have good reason for all those bins on the prairie: grain storage pays off.

Published on: November 16, 2012

Illinois and the Midwest, in general, have some tremendous advantages, including but not limited to ridiculously deep topsoil and beaucoup grain markets.

(I've always wanted to use the word "beaucoup" in a story. Check.)

That is to say, where we sit in our part of the world, we are farming directly between two major rivers that carry grain around the world ( the Illinois and Mississippi). We also have four ethanol plants within an hour's drive, and we have a rail terminal just 20 minutes away, where grain is whisked south to Texas feedyards and ethanol plants.

In short, we have options.

And in my years as an ag journalist, I have written endless stories about the best ways to market grain. Sell and hold? Use puts and options? Take advantage of carry and basis?


It's all reasonably complicated, but for our farm, one of the best investments we've made in our operation has been to build grain storage. That means grain bins. Lots of grain bins. As in, we can store our entire crop here on the farm; given the farmers I've interviewed over the years, we are not alone. "Storage pays," is a quote I have written down often.

The Spangler operation has been in bin building mode the past several years, and really, it seems you can't build a good one unless you wait until the hottest week of the summer. My husband came up with a grand master plan several years ago and we started building fresh in wide open space, on a farm located on a blacktop road. We started with a single bin and added something new every year.

The economics play out like this: we figure our bins have cost us $1 or less per bushel to build, mostly because we did a lot of the work ourselves and occasionally we've gotten lucky and caught a low steel price. Most economists would tell you to figure $1.50 to $2 a bushel to build.

The pay off: if we harvest our grain and store it ourselves instead of taking it to the elevator right away, and sell it for a late-winter or early-spring delivery, we can pick up 20-30 cents in basis improvement (the difference in price between the actual Chicago Board of Trade and an elevator way downstate, which varies throughout the year) and 30 to 50 cents in what we call "carry" (essentially, the difference in price from October to say, January).

That is, of course, economics for a "normal" year, which we have not seen for at least three years. In the past three years, we've had small crops and the market's experienced continual wild swings, and holding onto our grain has done everything from causing us to lose money to making an extra $2 a bushel. Which is to say, it's been all over the place.

I think the moral of this story, for the non-farmer, is that marketing: A) is huge. It's the price we get for an entire year's worth of work. It matters. And B), it ain't easy. Careers are made in watching grain and commodity markets, predicting what they'll do and advising farmers on what to do. My husband has taken additional coursework to learn more, he's brought specialists to the farm, and he talks to our marketing advisor on an extremely regular basis.

Despite the uncertainty, this we know for sure: grain storage pays.

 

The archives: 30 Days on a Prairie Farm

Kickoff: 30 Days on a Prairie Farm

Day 1: Working Kids

Day 2: Biotechnology

Day 3: Harvest Eats

Day 4: Church

Day 5: Biotechnology, Again

Day 6: Long Haul

Day 7: Hormones

Day 8: Weather

Day 9: Milk

Day 10: County Fairs

Day 11: Harvest

Day 12: Technology

Day 13: Show Ring

Day 14: Leave the Farm 

Day 15: Dialogue

 

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