Farmers, elevators to look for storage alternatives this harvest

Farm Forum

Great yields, storage issues, rail congestion and low prices are on the minds of farmers as they gear up for harvest.

It’s the end of July and, for many, time to harvest wheat. The crop report from last week indicated only four percent of the winter wheat had been harvested, down from the normal of 32 percent.

Storage issues

Jeremey Frost, grain merchandiser for CHS Midwest Cooperative in Pierre, said that wheat harvest has begun in earnest around Pierre.

“Typically we wouldn’t go to ground storage until 2 to 3 weeks into harvest,” Frost said. “Now 2 to 3 days into winter wheat, we’re putting wheat on the ground.”

The facility had hoped to move out last year’s grain before this year’s harvest began. Rail cars have been ordered but not delivered. That leaves little room for the incoming wheat, which is seeing record yields. The location is served by the Rapid City, Pierre and Eastern Railroad which took ownership on June 1. It was formerly the DM&E.

“They’ve said they’re doing the best they can but congestion issues north of us continue to impact the availability of rail cars and power in our area,” Frost said.

The elevator is land-locked without much room for grain piles. Frost said a fair amount of the wheat coming in is being stored on the ground in any spot the elevators and producers can find to store it.

Last year the U.S. produced nearly 14 billion bushels of corn; that’s equal to nearly 500,000 more rail cars of corn than the nearly 12 billion bushels of corn production the U.S. averaged the previous 3 years, according to Frost.

Frost said that it’s not just the rail situation, but also the massive crops that have changed through the years. In the Pierre area, it used to be that wheat was planted and the next year the land was fallowed or rested without a crop. Now crops, corn in addition to wheat, are planted on the ground every year, meaning there are more bushels produced. Corn averages about 100-150 bushels per acre in the Pierre area.

Frost said that, while eastern S.D. has lots of bins to hold grain, central S.D. is not set up with a lot of on-farm storage. This year, he said, “Those who have brought in wheat are seeing yields well above averages at 50, 60, 70 or even over 80 bushels per acres. We’ve not heard of anything less than 55. We’re used to seeing 40-bushel wheat.”

The infrastructure of CHS Midwest Cooperative is not set up to handle huge crops. As of Wednesday, July 23, the cooperative had 150,000 to 200,00 bushels on the ground. They hope they’ll get some rail cars to move out grain, but it’s a waiting game. They’ll take as much as they can, but they may have to turn farmers away.

“We’ve not been in this bad of situation before, and rail has had a big impact on what we’re facing,” Frost said. “It’s not a fun week, and it’s only going to get a lot worse. “

Storage and rail issues linked for elevators

With the market price of corn around $2.90 a bushel, farmers won’t be anxious to sell their grain from the fields. Some may store grain on farms in bins, but elevators have to be ready to take the grain when the farmers decide to sell.

“We’re been preparing for harvest since the first of the year,” Tom Bright, grain marketing specialist for Wheat Growers, said. “The freight market was stressed pretty hard this spring, really through April and May. Our staff did a great job of double duty, dealing with getting the grain loaded out in that time frame while also getting agronomic product out to customers. One of the big concerns, going into fall harvest, is all of the grain that is still on the farm. We know customers don’t like the prices, but we don’t know what (old crop grain) will be coming to us. There is the possibility of a double hit, the push of old crop in August and September followed by a big harvest.”

Although Wheat Growers has added 10 percent more storage space since last year, the company plans to use big plastic grain bags, 12 ft. by 500 ft. long, to hold wheat at some of the locations until it can be shipped out by rail.

“We’ll bring the wheat in, get it bagged up and out of the way,” Bright said. “After the crunch is over, we can open the bags and get it moved out.”

The company gave the bag system a good trial run last year, Bright said. Using the system for new crop wheat proved to Wheat Growers that the concept works and maintains quality.

Wheat Growers will be working with the new railway, Rapid City, Pierre and Eastern Railroad. Bright said Wheat Growers is pleased with service provided so far and looks forward to even better service. “Plus, the more grain that we can get moved, the better off we are,” he said.

The turnaround time for shuttles on the BNSF has not been great over the last couple of months. Bright is hopeful that as the railroads make changes, there will be more trains, and by September he hopes that turn times will be improved.

Farmers have been hesitant to contract grain this fall. When talking to farmers earlier in the year who were looking at prices of $6 to $7 for corn, Bright said it was hard for them to sign a contract for $4 to $4.50. And now that the price is way below that, it’s hard to sell at lower levels. Bright said that maybe one-third of the farmers have contracted their crops. By and large, farmers are waiting to see the market go up.

“I think farmers are getting educated on problems of the freight market,” Bright said.

Craig Haugaard, grain marketing manager for North Central Farmers Elevator, said, “We’re geared up for harvest. It will still be a challenge based on railroad performance. We’re sitting fairly good as far as capacity. We have about 30 percent of old crop which is where we’d like to be. We’ve spent a lot of time with repairs this spring, making sure everything is in good order. We have expanded bin capacity at Warner and are ready to run hard at harvest.”

Haugaard said corn prices haven’t been at this level since 2009. That year saw prices below $3 for most of the year.

When it comes to basis, much will depend on freight costs, Haugaard said. “We’ll continue to see fairly wide basis. Part of that is impacted by turnaround time of the rail shuttles. At present, shuttles are at 2.1 turns per month out to Pacific Northwest markets. It’s ideal to have the shuttle turns at 2.5 or better, especially at this time of the year when there aren’t really any weather delays. When it’s 2.1, it’s pretty concerning.”

Haugaard said the railroad is making an effort, trying hard to hire more people and bring on new engines. “It will take a while to get the boat turned around,” he said.

Undoubtedly, with good crop yields, some corn and beans will have to be stored on the ground, but getting it moved will depend on how soon the rail cars arrive.

Time to bag it

While wheat has begun to flow into elevators, many on the farm are reluctant to sell their grain as prices are so low. Some are looking at alternatives. In some fields this fall, passersby may notice an increase in some long, white, sausage-shaped tubes.

The white bags, 10 foot in diameter and as long as a football field (300 ft.), offer an alternative for farmers to store grain. Efficiency at harvest is critical, and the bags offer a way to handle high moisture crops without having to worry about the grain going bad.

Phillip Shanley of Warner has been using a grain bagger for about four years, and a lot of people have been asking him questions about it.

“It’s super, super easy to use in the field,” he said. “We can run two combines, two grain carts with four people. It’s a great time saver at harvest time.”

Shanley said that once the bag is sealed, the grain stays in the same condition as when it was put in the bag.

The bagging system uses a loader and an unloader, which Shanley said cost around $50,000 four years ago. Price depends on the diameter of the bags and added options. From what he’s heard, systems may run from $60,000 to $200,000.

Loading the bag is easy. If the bags need to be moved after they are full, that takes more effort. It’s best to get them off the fields before spring.

“It worked well this last year, with high-moisture corn and propane in short supply, we bagged the grain in the field,” Shanley said. “We kept it over winter and pulled it out when propane prices came down, drying the grain on the farm.”

They have used it for corn, up to 20 percent moisture and for rolled corn, which was over 30 percent moisture. They’ve also put dried distillers grain in the bags. His machine can’t be used for forages or silage. Depending on bag costs, he estimates the cost for this storage at about 5 to 7 cents a bushel.

Last year, they used 14 to 16 bags, and the year before 8 or 9. It’s a big savings over putting up a grain bin, and he figures that the system has definitely paid for itself.

They do keep on eye on them during the winter for potential damage from deer walking over them and puncturing the bags, but he’s found the bags are pretty sturdy.

“We use the grain bags quite a bit, whenever we have storage issues,” Slade Roseland of Seneca said. “It’s 24 miles from our farm to the elevator, so we bag crops in field, and haul it in later.”

Roseland figures that with unstable basis, if the grain isn’t already marketed, it’s an economical way to hold onto the grain. The cost isn’t much more that paying storage at the elevator.

“For us, it’s been a convenience thing,” he said. “We hire it done, but it’s important to get harvest out of the way. Hauling it to the elevator would just take too long when the combine is running.”

The process works well for sunflowers they contract for delivery in the winter. It’s a handy way to store the seeds and easy to pick them up, Roseland said. The machine rolls up the bag as it unloads. “It’s a very efficient process. We maybe end up spilling two five-gallon buckets.”

Demand for storage increases

Chris Kerfeld of Blue Lake Plastic in Sauk Center, Minn., said many farmers are looking at using the bags to ease some of the harvest pressure. Commonly used in countries such as Argentina, the bags are gaining popularity in the Midwest.

For Blue Lake Plastic, big white plastic grain bags make up 20 percent of the sales of the storage bags. Kerfeld said the grain bags are used to store canola, wheat, corn, but not many are purchased from them for soybeans.

As the company is in the heart of dairy country in Minnesota, in past years, many bags have been sold for corn and silage. The dairy farmers may order 2 or 3 bags. In the last 6 to 8 weeks, calls have certainly increased, including an inquiry from central South Dakota for 20 to 25 grain bags.

In the industry, the most common size is 10 ft. by 300 ft., which holds 14,000 bushels of grain.

“The bags provide an air-tight environment,” Kerfeld said. “If a customer puts grain in a bag at 18 to 20 percent moisture, it will keep without having to move the grain to a dryer. This works for those who have fields in remote locations as the farmer can bag the grain as fast as it comes off the combine. When the combining is done, then they can move the grain and dry it.”

Kerfeld said, “The calls for bags have doubled since last year and we’re not into the season yet.”

The high prices of commodities in the past few years have resulted in the need for farmers to take advantage of investment credits, and many put up grain storage on farms. Commercial elevators have increased storage at well. On- and off-farm storage capacity jumped 30 percent in the decade ending Dec. 1, 2013, according to the National Agriculture Statistics.

According to a story from Reuters, bagging keeps grain in better condition and for a longer period of time than the standard U.S. practice of piling surplus on the ground and covering it with tarps when the grain won’t fit into the storage facility. The white outside of the bag reflects the sun’s heat while the inner layer is black, acting as a barrier to sunlight and helping maintain a lower than ambient temperature inside.

By comparison, permanent storage costs $1.50 to $2.00 per bushel to build, or several hundreds of thousands of dollars, with waiting lists for installation often months long. Steel for bins has gone up in price 5 to 7 percent in the last year.

Jack Davis, crops business management field specialist for the SDSU Extension Service, said, “Farmers will have to go back through their operations to find the extra dime or quarter they can save through managing their grain storage and other savings,” Davis said. “When price is $1 below production costs, that doesn’t help the bottom line.”

Those putting up new bins in eastern South Dakota are generally looking at ones that will hold 50,000, 70,000 or 100,000 bushels. Most include some type of drying system.

“Producers will have to work their capital budget to see if it works,” Davis said. “Having bin space does allow some options. It avoids having to drive a distance to a grain elevator or having to wait in lines. It’s a long-term investment. As far as price for commodities, it will take time for changes as there will probably be continued downward pressures until the stocks get used up.”