Bracing for a Bin Buster

This year's corn crop promises to be the biggest ever. To prepare, farmers and grain handlers are scrambling to build more grain storage and learning how to meet ethanol industry quality parameters.
By Susanne Retka Schill | August 27, 2007
Grain storage builders are working feverishly to put up enough bins to house the expanding U.S. corn crop. The boom in building is expected to last several more years. In the meantime, what doesn't fit in bins will be piled on the ground in temporary storage.

The USDA forecasts the 2007-'08 crop will be the largest corn crop in history. However, when considering storage needs one has to factor in the amount of corn carried over from previous years. "We've been short of permanent storage capacity for several years," says Darrel Good, agricultural economist at the University of Illinois. "If you look around the country, each year we've got a lot of corn piled on the ground. A lot of elevators view this as an acceptable way to handle the fall inventory."

Good says the question is whether the problem is going to be any bigger this year than it has been in recent years. The USDA is projecting the combined total of old crop carried over and new crop to be 14 billion bushels, compared with the previous record of a little over 13.2 billion bushels of combined new and old crop in 2005. "On the surface it means we will have 800 million bushels more than we've had before, but you have to subtract from that any new storage built," he says. The USDA storage capacity report showed that in December 2006 there was 390 million bushels more storage than in December 2005. "I'm guessing we've added considerably more [storage] again in 2007," Good says. "Depending on where yields end up, our storage problem may not be any bigger than we've had in the past."

The USDA is predicting that the ethanol industry will use 20 percent of the corn crop. "Ethanol for the next two or three years will take a larger percentage of the crop as exports stagnate," Good says. "Feed use may actually go down a bit as a larger percentage of coproduct is fed." Typically, 15 percent of the U.S. crop is carried over to the next marketing year, however, this year's carryover is 1.1 billion bushels, or only about 10 percent of the crop, he says.

Shifting Trends
Scott Phillips, owner of Phillips Modern Ag Co. in New Hampton, Iowa, has been busy building grain bins on farms and elevators the past several years as corn acreage and yields have increased. The rotation used to be half corn and half soybeans, now more farmers are growing 70 percent and even 100 percent corn. "When you go from soybeans that produce 50 bushels an acre to a crop that produces 200 bushels an acre, you've got a deficit of 150 bushels of storage," Phillips says. That shift, plus the continuing trend of farms getting larger, means farmers have to have more storage. "Everybody would like to have a full year's worth of storage," he says.

Phillips typically sells 60,000 bushel bins, which measure 48 feet in diameter and are 40 feet tall. Nearly all of the corn in his area of northeast Iowa is harvested at around 22 percent moisture and dried down to 15 percent. In the past 10 years, all of the bins Phillips has sold have full-floor aeration capabilities. Cost factors have partly driven the move toward building larger grain storage bins—a small bin costs $2 per bushel to build, whereas a larger bin costs a little more than $1 per bushel, he says.

Sukop Manufacturing Co. of Sheffield, Iowa, is having a hard time keeping up with demand, says John Hanig, bin sales director. "With the ethanol push, we'll be seeing three to five years where we are selling as many bins as we can make." The company manufactures and sells grain bins and handling accessories. Last year was the start of the bin-building boom for Sukup. "We had no slow down in the winter at all," Hanig says. A year ago, grain bin sales were up 20 percent from the previous year followed by a 50 percent increase in sales this year to farms and commercial operations. In the past, the demand in the two major markets alternated, now both are increasing storage capacity at the same time, he says.

The changing structure of agriculture is also impacting the grain storage industry. "As farm sizes increase, farmers no longer want to fill the small bins they built 30 years ago," Hanig says. Instead, they are constructing big bins and handling systems similar to what commercial elevators built 10 years ago. Those larger bins will require better grain management training for farmers, says Charles Hurburgh, director of the Iowa Grain Quality Initiative and an agricultural engineering professor at Iowa State University. "You don't just wander up and stick your nose in a 100,000-bushel bin," he says. "And someone has to have the energy to climb to the top of the bin." With smaller bins, a farmer could tell whether the grain was beginning to mold by the smell. Also, a small bin of grain going out of condition didn't result in a huge loss, he points out. The larger bins require better grain quality management from the time the grain is put into the bin to avoid losses.

Corn Culture Shock
The ethanol industry is creating a bit of a culture shock in corn country, Hurburgh says. "The ethanol demand has changed the requirement for quality," he explains. Because ethanol plants only store a two to three week supply, farmers are being asked to store more grain on the farm for up to a year. Before the ethanol boom, the corn crop in Iowa came off the field in the fall and immediately began moving through the system in railcars, barges and ships. Shipping large volumes of corn provided elevators ample opportunities to blend off-spec corn with high quality corn.

It's difficult for farmers and grain elevators to blend small quantities of low-quality corn with better corn in 1,000 bushel truckloads for delivery to ethanol plants, he points out. High-speed loading facilities at grain elevators also put a crimp in the process. "How do you blend when it takes 30 seconds to a minute to load a truck?" Hurburgh asks.

It can be quite a shock to a farmer accustomed to getting discounts for off-quality grain at the local elevator to have a load of grain totally rejected at the ethanol plant, Hurburgh says. "Ethanol plants have absolute limits," he says. "They don't want more than 10 percent total damaged kernels." Absolute limits for corn moisture levels at ethanol plants are another big change for corn country. The ethanol plants want corn at a maximum of 17 percent moisture. "They reject anything over that," Hurburgh says. Farmers are accustomed to elevators taking whatever moisture levels they bring in and being discounted to cover the cost of drying. If this fall's weather conditions create a lot of high-moisture corn, Hurburgh doubts there will be enough drying capacity to adequately handle the larger crop.

Problems with Piles
In other big corn crop years, piling the crop on the ground has been a common practice. With the shift in acreage from soybeans to corn, that's sure to be the case this year. However, outside storage doesn't work as well for ethanol markets, Hanig says. "In the past, [outside storage] had acceptable losses," he says. Some grain was discarded, but slightly damaged corn could be blended out with higher quality corn when loading unit trains. "Ethanol plants want all good No. 2 [quality] corn," he says.

In Illinois, elevators are accustomed to putting corn in temporary storage outside, Good says. If it stays dry and cold the quality can hold, he says. "I'm told the pile will develop a crust that tends to shed rain and limits the amount of deterioration if it doesn't stay there too long," he says. "No one wants to carry it into spring, but it can sit there two to three months without too much loss."

A successful temporary storage system for outside corn piles starts with a solid foundation, preferably blacktop, Hurburgh says. "Cement's fine, but too expensive," he says. "But not gravel." Stray stones picked up when loading the corn can damage the ethanol plant's hammermills. The pile should be surrounded by a low wall made of wood or steel to contain the grain and facilitate aeration. Metal ducts placed under the corn pile can be connected to aeration fans that require about one horsepower for every 10,000 bushels. Hurburgh recommends laying perforated plastic drain tiles across the top of the pile and covering that with plastic tarps tied down. When the wind picks up, the draw-down aeration fans create suction in the pile which holds the tarp tight against the grain pile. The temporary storage will cost between 25 cents and 50 cents a bushel, he adds.

Other Trends
Most ethanol plants are located in corn growing areas where the crop is delivered by truck. That has spurred some elevator companies, such as the South Dakota Wheat Growers (SDWG) in northern South Dakota to build new facilities that are easily accessible to truck traffic. New SDWG grain-handling facilities at Hecla and Cresbard will be able to store nearly 7 million bushels of corn and are being built to handle this fall's crop with high-speed dumps. The sites have good access to several ethanol plants.

Yet another trend in corn country is the sale of "condo storage." SDWG, which offers condo storage, describes the concept as time-share storage, where producers contract for grain storage space by paying a share of the bin cost upfront and possibly receiving tax deductions. SDWG assumes the risk of maintaining grain quality and provides insurance, electricity and other maintenance services for an annual fee plus a monthly storage fee for grain actually in storage.

Other observers note that the need for more corn storage could provide opportunities for country elevators that missed out on the move toward building high-speed unit train loading facilities.

Susanne Retka Schill is an Ethanol Producer Magazine staff writer. Reach her at [email protected] or (701) 746-8385.