A vacation home for your grain
To meet the storage needs for this year's mammoth corn crop, Corn Belt cooperatives are turning to an alternative grain storage option.
Condominium grain storage, developed in the early- to mid-1980s, has seen a resurgence in popularity in recent months. A condo system offers an alternative to on-farm storage: A cooperative builds specific storage facilities, usually anywhere from 500,000 to 700,000 bushels each, with each site's capacity parceled out into increments that are sold to individual farmers as shares.
"The condo encourages producers to deliver grain for the elevator to manage," says University of Missouri Extension ag business management specialist Parman Green. "Producers are encouraged to utilize the condo because they have an equity interest in the storage facility. For a given investment, a producer gets the right to store a specified amount of grain in the facility."
Once a farmer pays a one-time price of around $1.30 to $1.60 per bushel (and an annual management fee), he or she essentially owns that storage capacity, usually in 5,000-bushel increments, and is entitled to deliver and sell grain when so desired or sublease or sell the storage capacity down the road. For the farmer, says Cooperative Elevator Association (CEA) general manager in Ocheyedan, Iowa, Rob Jacobs, the primary benefit for the farmer is marketing flexibility.
"He's always got grain in a sellable position," Jacobs says. "He pulls the trigger whenever he wants to."
"They can deliver both corn and soybeans into that 5,000-bushel space," says West Des Moines, Iowa-based Heartland Cooperative executive vice president Tom Hauschel of the farmers utilizing the condominium storage facilities the co-op operates at its Iowa locations. "It gives them flexibility and allows them to better manage their supplies."
Jacobs says CEA completed a 425,000-bushel site at its Sibley, Iowa, location in summer 2006, comprising 85 5,000-bushel farmer-owned shares. This summer, CEA constructed an additional 540,000-bushel condo site, selling shares for $1.35 to $1.50 per bushel. Including grain handling and infrastructure improvements, the cost is typically lower than initial construction for on-farm storage.
"For on-farm storage, the farmer really considers his cost for the augers, motors, spreaders and bins," Jacobs says. "Here, the farmer's just buying the bin. We're responsible for everything else."
Heartland Co-op, like CEA, expanded its condo storage capacity this year, adding a 680,000-bushel facility at its Dallas Center, Iowa, location. Most of the shares in the 2.3 million bushels of condo storage owned by Heartland should be sold well ahead of this latest project's completion this fall, Hauschel says.
The availability of condo storage in parts of the Corn Belt comes at a good time, according to Steve Sukup with grain storage manufacturer Sukup Manufacturing Company in Sheffield, Iowa. With storage in high demand right now, the farmer is able to have marketing flexibility without the handling and infrastructure concerns that on-farm storage can create.