Having grain storage located on the farm can offer opportunities for higher ROI and flexibility at harvest. In a press release from GSI, experts noted that on-farm grain storage has continued to grow in recent years. The risk of fluctuating commodity prices and also input prices mean growers must make smart marketing choices.
Leverage supply, demand
Adam Dryer, of Blue Reef Agri-Marketing, Inc., explains how on-farm storage can help benefit farmers.
1. The ability to bypass historically wide “basis” levels in the fall. Basis is the difference between the Chicago Board of Trade daily market price and the price that elevators pay to farmers. At harvest this price is typically much lower due to the fact that elevators are receiving large quantities of grain when there is no additional demand to account for it. Dryer notes that the basis spread may be more favorable to the producer, depending on his location, by storing and delivering grain at a later date, when the market has reduced supply and there is still demand.
2. Higher prices when farmers contract their grain and store it for future delivery – known as market carry. For example, Dryer says that the combination of basis appreciation and market carry on a summer 2015 corn delivery contract could add 40 to 50 cents per bushel to a farmer’s gross revenue, assuming an average or better crop this season.
Another factor to consider is the market’s need for a consistent grain supply. On-farm storage allows growers to capitalize on this. Processors, rail facilities and ethanol plants in the Midwest need that reliable supply.
Flexibility, reduced grain loss
Storing grain on the farm allows grower to get the crop out of the field quickly, reducing the chance for lost revenue, according to Scott Becker, GSI. Potential delays at a grain facility are avoided with on-farm storage, and harvest bottlenecks are reduced.
Visit grainsystems.com for more information.
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