How Much Grain do You Give Away?

Delivering below base moisture can cost you - this spreadsheet helps you figure it out?

Published on: Dec 30, 2008

Farmers who deliver grain that's below the base moisture content that buyers use to price it give away dry matter that they could sell at the price of grain if the grain was at the base moisture content used to price it. This spreadsheet quickly tells you how much grain you're giving away.

The equivalent weight (bushels) determined by this spreadsheet accounts for the change of weight due to loss or gain of water to bring any grain from one beginning moisture content to another final moisture content.

DOWNLOAD - Grain Moisture Spreadsheet

The true relationship for weight change due to moisture change is: (100 - initial percent moisture)/(100- final percent moisture) = the multiplier to apply to the initial weight (bushels).

When adjusting weight when going from a higher to a lower moisture content, you can view the multiplier as a "shrinkage factor. Conversely, when adjusting weight when going from a lower to a higher moisture content, you can view the multiplier as an "expansion factor."

Shrinkage and expansion calculated in this spreadsheet adjust only for water loss or gain. Elevator shrink factors usually include an additional allowance for handling losses encountered when drying grain.

Why spreadsheet is useful

Many farmers want to make sure they get corn dry before they deliver so they can avoid being levied a shrink charge. Unfortunately, getting grain to the exact moisture content buyers use to price it can be tricky. Even more unfortunately, the financial penalty for delivering grain that's below the base moisture used to price it is more severe than the shrink discount.

Most buyers use a base moisture of 15% for corn, 13% for soybeans and 13.5% for wheat. But farmers often deliver grain to the elevator at moisture levels below the base. On good drying days, soybeans can come out of the field at 12%, 10% or even 8% moisture.

Dry matter creates value

Grain contains water and dry matter. The dry matter contains the value. When grain comes in above the base moisture content used for pricing, buyers apply a shrink factor to adjust the quantity for the excess moisture. Why? Grain buyers cannot afford to pay grain price for excess water. Applying the shrink factor approximates the equivalent number of bushels that would be in the load if the grain was dried to the base moisture content.

Farmers readily see how many bushels they lose when buyers pencil shrink grain that is above base moisture. When farmers deliver grain below the base moisture the loss is next to invisible. That's because most farmers don't take the time to calculate how many bushels they'd have if their grain was at the base moisture content used for pricing. A bushel of 10% moisture grain contains more dry matter than a bushel at 13% moisture. Farmers can no more afford to sell that excess dry matter at the price of grain than buyers can afford to buy excess water at the price of grain.

Understanding the numbers

Suppose a farmer has a field of soybeans that has grown 522,000 pounds of dry matter.

At 13% moisture, total scale weight at the elevator is 600,000 pounds. That's 78,000 lbs of water in addition to the 522,000 lbs dry matter. At 60 lbs per bushel the farmer has 10,000 bushels. Selling the beans at $10 would generate $100,000 revenue.

Alternatively, suppose the beans had been harvested at 16% moisture. The farmer would still harvest 522,000 pounds of dry matter, but the beans would contain 99,429 pounds of water. Total weight would be 621,429 pounds equal to 10,357.1 “wet” bushels (621,429/60). The elevator cannot afford to buy excess water at the price of soybeans. The elevator applies a shrink factor to adjust the quantity.

Beans lose 1.149% of their weight for each point of moisture removed going to a final moisture of 13%. The buyer may use a bit higher shrink factor to account for handling losses during drying. Suppose the buyer uses a 1.3% shrink factor. The elevator "pencil" shrinks the beans by 403.9 bushels (10,357.1 x 0.013 x 3). The farmer gets paid for 9,953.2 bushels (10,357.1 - 403.9). At $10 beans, his check would be $99,532, $468 less than had he delivered at 13% moisture.

Finally, suppose the farmer harvests at 10% moisture. The beans would still have the same 522,000 pounds of dry matter but only 58,000 pounds of water. Total weight would be 580,000 pounds. The buyer would pay for 9,666.7 bushels (580,000/60). That's 333.3 bushels less than if the farmer delivered his beans at 13% moisture. At $10 beans, his check would be $96,667, a sizable $3,333 smaller than had he delivered at 13% moisture.

Buyers readily shrink grain that comes in above the base moisture content used for pricing. But they make no similar adjustment when grain comes in below the base moisture content. The result--when farmers deliver grain that's below the base moisture, they give the grain trade bushels of free dry matter and get nothing in return.

An easy solution

"A simple change in grain buying practices could remove the penalty farmers face for bringing in grain that's below the base moisture used for pricing," says Lowell Hill, University of Illinois economist. "The grain trade could adjust the quantity of grain that comes in below the base moisture to the equivalent number of bushels that the grain's dry matter would be if the grain was at the base moisture for pricing. The formula to do so is the same formula buyers currently use to shrink 'wet' grain."

Many grain buyers currently gain income by blending lots of different moisture contents to the base moisture. Changing buying practices to buy on an equivalent bushel basis would eliminate income from blending grains of different moisture contents.

"Elevator fees for other services might have to rise to replace income buyers currently receive from blending," admits Hill.

Some farmers think switching to equivalent bushel buying would boost the value of the nation's annual grain crop. "That won't happen," says Hill." Remember, the value is in the dry matter. Equivalent bushel buying will not create any additional dry matter in a crop.

However, equivalent bushel buying would more equitably distribute the income from the crop among the producers who create the dry matter that gives the value."

Another alternative is for farmers to devise ways to add moisture to grain. That might be done by aerating on high humidity days. However, the Food and Drug Administration prohibits adding water to grain for the purpose of increasing value. One would have to aerate for the express purpose of maintaining grain quality.

"Changing buying practices to buy on an equivalent bushel basis would remove all incentive to attempt to rewet grain that's below the base moisture content," says Hill.

DOWNLOAD - Grain Moisture Spreadsheet