Is On-farm Grain Storage Worth the Investment?

Many farmers utilize on-farm grain storage to store and preserve harvested grain while waiting for optimal market prices and avoiding costly freight prices at peak harvest times.

In this blog post, we'll outline the income benefits that on-farm storage brings to a farm and analyze in which regions farmers are more likely to achieve price improvements with on-farm storage.

Why Do Farmers Invest in On-farm Grain Storage?

Having on-farm storage at harvest time can streamline operations by reducing the need to deliver to local elevators and freeing up labor and equipment. Additionally, on-farm storage provides the opportunity to extend pricing for a grower's crop, potentially getting better prices after the harvest season has passed.

However, these on-farm storage benefits can come with sizable upfront investments.

How Much Does On-Farm Grain Storage Cost?

A typical storage bin of 30,000 bushels can cost around $70,000, which translates into about $2.33 per bushel.

Unfortunately, these upfront investment costs must be weighed against uncertain returns of price improvements in the marketplace, making it challenging to evaluate.

Additionally, since cash grain markets throughout the U.S. can respond to different local and regional forces, there is no one-size-fits-all investing advice applicable to all farmers. Instead, each farmer must not only look at the cost of a particular storage bin, but also have a firm understanding of future market-based returns.

Financial Benefits of On-Farm Grain Storage

1. Harvest Efficiency
Having control over grain storage can improve harvest efficiency and logistics, allowing farmers to store their crops on the same farm where they were harvested instead of local elevators. This reduces the time and labor required for transportation, allowing farmers and farm personnel to focus on other aspects of their ag operations.

Additionally, on-site storage enables the combines to run non-stop, avoiding delays in the fields caused by long waiting times in the elevators and not having a place to unload grains. This is particularly important in weather-related events, where the window for harvesting narrows and all farmers get back to harvest simultaneously, overflowing the local elevator.

2. Transportation Cost Savings
If farmers haul grains using farm equipment, having on-farm storage allows them to use that equipment more efficiently when there are fewer farm activities and equipment is more readily available.

If the grains are transported using hired trucks, off-season transportation, and at large volumes, farmers can negotiate lower transportation fares. Waiting until there is a full truckload or more before transporting grain to the market or grain elevator also reduces transportation costs.

3. Higher Prices Through Futures Market Price Carry
Another benefit of on-farm grain storage is the ability to take advantage of futures market price carry. Price carry refers to the situation where futures prices for a commodity increase over time, resulting in a higher price for delivery at a future date.

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