Take advantage of low-interest financing and bin improvements to update your storage system.
This year may shape up to be the ideal time to purchase grain equipment if a couple factors play out for the industry. First, the weather must hold out. A strong bin-buying season depends on good weather, because nothing dries up business faster than a drought.
And second, you may be able to take advantage of a government program, promised to materialize soon, that will provide low-interest loans for storage purchases. Add the low-interest loans to a market already offering strong promotions and you face some good deals for buying bins.
Here are some tips from the experts on factors to consider when weighing your buying options.
Look into a government loan
For the first time since 1982, growers may be eligible for government farm storage loans. USDA's Farm Service Agency (FSA) reports that a grain storage loan program is very likely this summer. Reasons for resurrecting a loan program now include the need to give farmers more flexibility in marketing as well as ways to segregate value-added or genetically modified crops.
Although the program rules were still being written at press time, FSA Deputy Administrator Larry Mitchell outlined the general requirements that are expected to be included.
Terms of the loan will include 25% down, seven-year terms and an interest rate of 6% or better, based on the U.S. Treasury rate. Growers may borrow a maximum of $100,000. The storage may not exceed two years of production from the farm.
According to Mitchell, the loan will cover grain storage and handling equipment that is not portable, such as non-portable dryers, augers and grain legs. Flat storage is included, but only for the percentage of time it will be used for grain storage.
USDA personnel must conduct an environmental inspection. Mitchell explains this inspection is not invasive, but is similar to inspections conducted for real estate transactions. However, in the past, USDA has been forced to take possession of sites that were contaminated by hazardous materials.
The loan program should be rolled out in late spring or early summer to qualified growers wishing to build grain storage. Growers will not be eligible for the loan if they initiate a storage contract prior to the program's implementation.
For that reason, many growers are waiting to take advantage of the loan program before signing purchase agreements with their storage equipment dealers. "I know dealers feel a real procrastination by growers because of the loan program," says Burl Shuler, vice president of GSI storage and equipment. "Growers want to do something but want to do it with this program if it is real. So they put off the decision."
If decisions are put off until summer, dealers may face labor shortage problems when trying to put up all the bins by fall.
Does storage pay?
Before building any grain storage, consider the economics, reports Stan Stevens, University of Minnesota grain marketing economist.
"The important thing farmers must realize is if they are building storage to own corn, then futures contracts make more sense," Stevens says. "You don't have your money tied up. But to build storage because you want to see the appreciation in the cash corn market relative to the futures, that is a good reason," he adds. "Typically, that spread is 25 cents a bushel from fall to spring."
If building storage makes sense, you should then determine if the government loan program pays better than a traditional loan or leasing.
"Some individuals are saying that even if there is a government program, buying or leasing bins ahead based on the winter programs are better than waiting for a low-interest loan," suggests Harmon Towne, vice president of Chore- Time Brock (CTB) national accounts.
Grain storage leases usually are 10% of the principal down, five years of payments and a 10% buyout at the end. Plus, leases offer tax advantages. Towne advises, "Look at what you can borrow money for on traditional loans and leases versus what you borrow money for [on the government loan]."
Consider commercial-style storage
"We're seeing a real move towards commercial-class grain drying and handling systems on the farm," reports Warren Odekirk, grain systems technical manager for Growmark, Bloomington, IL. "Farms are getting bigger. In some cases, the handling volumes on the farms are bigger than small country elevators."
Combines able to handle 2,000 bu./hr. create a need for larger and commercial-class equipment. "Look at the equipment farmers must have to handle that [volume] in terms of grain carts, semis and the receiving part of a grain system," Odekirk says. "It is extremely important to properly size equipment so you don't have a bottleneck. You can't just add a grain bin out back, which is what a lot of growers have done over the years."
Growers who need bins with a capacity greater than 50,000 bu. will have to step up to commercial storage tanks, Odekirk says. Commercial storage tanks cost more to construct than farm bins because of the concrete foundations that are required, higher erection costs and the cost of the accessories sold with these tanks. However, the investment in commercial-class equipment should pay back over the life of the system because of their lower maintenance and operating costs.
Make storage big enough
"It seems to me that growers should think larger and bigger in planning storage than ever before," Odekirk suggests. "If you look at 15 years ago, we were moving from wagons to straight trucks. Now, just about everybody is using semis.
"Extension people used to say, figure a storage system for today and then double it. Really, that is not enough," Odekirk says.
Economics help drive the trend to bigger bins. A 10,000-bu. bin may cost $1.50/bu. compared to $1/bu. for a 25,000- to 30,000-bu. bin, reports Joe Bruning, a GSI dealer in Shelbyville, IN. The bigger the bin, the more economical it gets on a cost-per-bushel basis. He says the average farm bin put up in his area has a 40,000-bu. capacity.
A year ago, the grain handling industry thought growers would seek smaller bins to handle segregated grain. Instead, growers used the small bins already on their farms for segregating value-added crops and built bigger bins for commodity crops.
Now growers want large bins for their value-added contracts. Some growers even think in terms of barge-size bins that range in capacity from 45,000 to 70,000 bu., Odekirk says.
Seek self-cleaning systems
"One thing that hasn't received much attention and I think it will become more important is how well do conveyors and dump pits clean out," suggests Marvin Paulsen, agricultural engineer, University of Illinois. "This gets to be important if you handle non-genetically modified or specialty grains."
If you are buying new equipment, ask the salesperson about self-cleaning. Or if you can watch new equipment operate before purchasing, check to see how well the grain cleans out.
Check the boot in a bucket elevator after the elevator runs empty. The material left in the boot can get mixed in with the next load.
Dump pits also may cause contamination. Lift the grate on the pit to see how much material is left after the auger empties the pit.
Consider a fully perforated floor
Paulsen recommends that growers install a fully perforated floor in a new storage bin. The floor allows better airflow when the grain is being aerated.
"A fully perforated floor gives your bin a little more flexibility in the future if you ever want to put in a low-temperature or natural drying system with more airflow," he says.
Good aeration also depends on properly sized fans. Odekirk suggests making sure fans are correctly sized at installation. Fans that are too small will spoil grain and fans that are too big run up electric bills.
Most grain equipment dealers can provide computer programs to check bin sizes, airflow rates and fan sizes.
Plan a total storage system
"Anytime you add a component, you really ought to have a whole design completed of the total system," Paulsen says. "Where you place a bin will affect your handling system and how you're going to get grain to the bin for a long time in the future."
Growmark uses a computerized flow analysis program to help plan storage components and the site. The program determines the size of each component, starting from the combine. It allows for what-if situations, such as what effect a larger combine will make on the current system. Odekirk says most universities offer similar programs to growers.
"Farmers really need to think through this whole receiving process, dryer, and wet holding and tie it all together so there is no bottleneck in the chain," he says.
Today, he sees growers with four to five small storage sites consolidating grain handling on one new site. "This gives you the opportunity to do long-range planning and not repeat the mistakes of previous years," he says.
Proper planning that allows for expansion will give you a storage system that will remain efficient for years to come.
Commercial-strength grain conveying
A new industrial-strength grain conveyor called the VacBoss, from Christianson Systems, handles big grain-moving jobs with minimal grain and seed damage.
According to the company, the vac's BlowerGard Filtration system, which operates at nearly 100% efficiency, increases its blower life, and the product is 35% more energy efficient than traditional grain vacs of comparable capacities. A 5-yr./2,500 hr. abrasion-free blower limited warranty backs the company's claim that the VacBoss withstands rigorous conveying conditions in all handling environments.
The VacBoss 4066 is available as PTO, diesel or electric and loads trucks at up to 4,000 bu./hr. through 6-in. pipe. Price of the model starts at $24,000. For more information, contact Christianson Systems Inc., Dept. FIN, Box 138, Blomkest, MN 56216, 320/995-6141.
Big dryer, gentle unloading
A new commercial-size grain dryer from Beard Industries gently unloads grain with no augers or metering rolls. The company's new E Z Flow unloading system is available in the Meyer Energy Miser tower dryers. Dryer capacities range from 1,000 to 5,000 bu./hr. The unloading system maintains top grain quality without the augers to damage grain.
Another feature of the Meyer dryers is automatic continuous clean-out of the plenum divider floor, which is important for preserving the identity of grain. Prices start at $80,000. Contact Beard Industries, Dept. FIN, 1750 W. State Rd. 28, Frankfort, IN 46041, 800/541-7900.
A new heavy-duty commercial grain unloading system is on the market from Sukup Manufacturing Company. The system can unload up to 6,000 bu. of grain/hr. with 12-in., 12-gauge tubing. The unit fits under 157/8-in. floors and in bins up to 120 ft. in diameter. A reduction drive features an enclosed, self-lubricating chain drive for easy maintenance. A slide-gate assist crank helps make opening the slide gates easier. Price of a 30-ft. model with a horizontal angle-ring power head is $3,730. For more information, contact Sukup Manufacturing Co., Dept. FIN, Box 677, Sheffield, IA 50475, 515/892-4222.
Computerized bin control
Fingertip control of an entire in-bin drying system comes in the CompuDry Command Center from Shivvers. The computerized panel provides precise moisture control at all drying temperatures, automatic grain transfer and easy operation, according to the manufacturer. This will prevent costly overdrying, low test weight and moisture guesswork. Price of the system starts at $3,600. For more information, contact Shivvers, Dept. FIN, Box 467, Corydon, IA 50060, 800/245-9093.
Heavy-duty bin sidewalls
On-farm grain bins can reach bigger capacities and higher heights with new heavy-duty steel from GSI. The company now offers bins with 5-gauge and 6-gauge galvanized steel sidewalls, so bins can be built with 31 to 33 rings. Top capacity is 710,000 bu. Until now, the heaviest steel used in bins was 8 gauge and laminated, for a capacity of up to 600,000 bu. The new steel can also be used in 72-, 75-, 78- and 90-ft.-dia. grain bins.
"While this is not for everybody, there are occasions when people want these size vessels," reports Burl Shuler, vice president of GSI storage and equipment. "We feel comfortable offering this size product." For more information, contact Grain Systems Div., The GSI Group Inc., Dept. FIN, Box 20, Assumption, IL 62510, 217/226-4421.