Posted on August, 28, 2024 at 08:48 am
If North Carolina corn farmers want to continue increasing their grain production to help meet the feed demand of the state’s hog and poultry industries, they will need to increase on-farm grain storage to market their crop beyond harvest when commodity prices are typically lower.
The challenge? To determine the grain storage system your farm needs so that the system pays for itself and makes a profit.
To help North Carolina farmers figure this out, North Carolina State University Extension Economist Professor Nick Piggott assembled an expert panel of 12 North Carolina farmers to assess the profitability of on-farm storage. The research was funded by the Corn Growers Association of North Carolina.
Conducted by Piggott and graduate student Jack Robinson, the study analyzed the investment costs and operating costs of small, medium, and large-grain storage systems. Robinson notes that storage returns are highly variable each year, so it is important to consider averages over ten-year, five-year, and three-year periods.
“In some years, on-farm storage is not necessarily going to pay depending on prices and basis and what happens in the market. That’s why we look at averages. We want to see what these prices are going to do over long periods since investment in storage is not a year-to-year thing,” Robinson explained at the Northeast Ag Expo Summer Field Day on July 25 at TBS Farms in Hertford.
At the field day, Piggott said research confirms that farmers can get a higher price most years if they store their grain and delay sales between March and June.
“We’ve shown in this study this is profitable and you can get a higher price. But what we’ve also found is there are other benefits other than just the ability to store the grain. When you have grain bins, it changes your harvest efficiency,” Piggott said.
“For example, when you have an on-farm grain dryer and grain bins you can harvest for longer periods each day because you have the ability to harvest grain that is wetter and then dry it down. You also have a longer harvest window because you can also go and get higher moisture grain earlier especially when a storm is coming,” he said.
Piggott presented data at the field day that shows North Carolina was the nation’s third-largest hog producer and fourth-largest boiler producer in 2023. He estimates the state’s poultry and hog industries consume roughly 300 million bushels of feed grain, wheat and corn, each year.
“On average, we produce about 120 to 130 million bushels, which means we’re 170 million bushels short of our feed grains we need every year,” Piggott said.
North Carolina currently has grain storage capacity of roughly 215 million bushels. Piggott said around half is on-farm and the other half is off-farm. In the last five years, grain production has increased in the state while on-farm grain storage has remained flat.
“In 2021, which was a record year, we produced 154 million bushels of feed grains. We only have about 105-million-bushel storage capacity on farms, which means as much as 49 million bushels are coming from the fields going straight to the elevator and that causes a lot of logistical problems at harvest,” Piggott said.
In their research, Robinson explains that a small facility has no elevator system and no on-farm dryer. He said a medium facility includes an on-farm dryer and an elevator at a lower capacity compared to a large facility, which has a more efficient drying system and handling system through the elevator.
Robinson notes there are economies of scale for all three facility types, with per-bushel costs decreasing as each facility type’s capacity increases.
“For a small facility with no elevator, the per-bushel cost ranges from around $6.25 for a limited capacity of 60,000 bushels. These costs for a small facility can be reduced to around $4 per bushel with an expansion capacity of up to 200,000 bushels,” Robinson explains.
“For medium facilities of around 200,000 bushels, we’re looking at approximately $6.75 in investment costs. This is because we have to add the elevator. We have to add the handling system as well as grain dryer system, but this can further be reduced by increasing capacity to 400,000 bushels with the same sort of handling systems and drying systems …. $4.75 a reduction in $2 per bushel by scaling up capacity.
Medium facilities that include an elevator cost around $2 more per bushel of capacity, costing around $6.75 per bushel for 200,000-bushel capacity. By scaling to 400,000 bushels, medium facility investment costs can be reduced to around $4.75 per bushel.”
Robinson says a larger elevator facility costs around $5 per bushel more than a medium facility at 200,000 bushels. He said the differential shrinks as capacity increases with the average per bushel investment costs of a large facility with 400,000-bushel capacity pegged at $7.25.