Crops

Weighing the economics: Deciding to sell or store grain in 2020

lilly platts

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Grain storage is expected to increase, as farmers anticipate above-average harvests and low prices

 

Making a living in agriculture often requires a belief that the future will get better, and for many grain farmers, this faith keeps getting pushed into the next year. The bushels of grain stored after harvest has been steadily increasing over the past several years due to low prices and the fact that the benefits of storing commodities often outweighs the losses that would be incurred by immediately selling. The full impact of the coronavirus is yet to be seen, but the subsequent economic conditions appear to be exacerbating this trend.

Mostly ideal weather conditions across the country this year have set many of us up for an above-average harvest for crops like wheat and corn. As of June 30, on-farm storage of wheat stocks is up 12.3 percent compared to last year, and corn is up 2.6 percent, according to the USDA’s National Agricultural Statistics Grain Stocks Report.

In one example, Montana farmers in 2019 received an average of $4.65 per bushel for wheat, which was just 10 cents above the national average. Projections for the coming months are close to this price, and if anything, have been losing ground leading up to harvest. Crops such as corn have seen a better price outlook than wheat, but with people traveling less, consequently less demand for ethanol, and export competition from South Africa, corn demand is decreasing, and prices are going down as well. The cost of production, of course, differs too much by region and situation to make any blanket statements about profit, but for the most part, farmers are feeling the same pressure to hang onto their crop in hopes of a better outcome next year.

The decision to sell or store grain simply comes down to economics, according to Vince Mattson, president of the Montana Grain Growers Association. The interest on an operating loan, cost of putting up additional bins, and a number of other factors go into each individual’s decision. Mattson’s family, located near Chester, Montana, has chosen a marketing strategy that avoids having to store a large amount of grain on the farm. However, he can see why many are choosing to do so. When asked if he has a feel for the effect the coronavirus is having on decisions, Mattson said, “Farmers have been holding onto grain for several years now, to be honest — it’s been building over the past three years. People are selling some, but there are a lot of new grain bins going up everywhere.”

Image by Rambleon

One factor the coronavirus has undoubtedly added to these decisions involves the requirements of some government assistance programs. Mattson explained that there is always the possibility that to qualify for a program, a farmer will need to have grain on-hand, which would not work out in the favor of a business like his family’s, which has chosen to avoid excess storage.

While storing grain does offer a temporary solution for farmers who choose to retain it, storage strategies can make or break the eventual viability of this plan. Dr. Kenneth Hellevang of North Dakota State University studies storage strategies and offers advice to farmers on how to make sure their crops last until they choose to sell. Moisture content, temperature gauge cables, and circulation are the three main things he tells farmers to focus on when building and managing storage bins.

Harvest conditions, and the moisture content and temperature of the grain at the time of harvest are much more critical if the grain will be stored on-farm for an undetermined amount of time, as opposed to being sold. Bad circulation and too much moisture not only lead to a decrease in quality and therefore price, but also poses a serious risk to the safety of those working around the bins.

Hellevang explained, “When we have these problems, grain doesn’t flow well in the bins as they start to unload, and you end up with chunks of grain that block it. If the quality and condition of the grain is marginal, we need to really be really concerned about safety. We’ve had way too many people injured or trapped in grain bins over the winter.”

Whether farmers are storing or selling their 2020 harvest, there is no doubt that they will continue to feel the stress of low prices, and many will be adding to already large stores. Decreased travel and ethanol production is one known effect the coronavirus is having on corn prices, and as economic implications continue to unfold, other grain commodities will likely be impacted as well.

 

Lilly Platts lives in Montana, where she is an editor at the American Simmental Association and writes freelance pieces for a number of ag publications. 

Any views or opinions expressed in this article are those of the author and do not reflect those of AGDAILY. Comments on this article reflect the sole opinions of their writers.
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