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Farm News
02/17/06
Condos offer new grain storage options
By DARCY MAULSBY- Farm News staff
Golden mountains of corn piled on the ground at Iowa’s elevators may become a thing
of the past as more cooperatives and farmers take advantage of grain condo storage.
If you think Iowa’s had grain storage challenges in the past, it’s only just beginning,î”
said Tom Hauschel, vice president of grain at central Iowa’s Heartland Cooperative.
“The large corn and bean carryovers make condo storage a timely solution.î”
With condo storage, farmers who want to own or contract storage in their local elevator
provide all or a portion of the money required to build additional grain storage. For a
specified investment, they get the right to dry and store a specified amount of grain in
the facility. The arrangement can provide improved grain quality, tax advantages for
participating farmers and other benefits.
Extra storage has become critical for many Iowa cooperatives, since U.S. agriculture
faces a 2.4-billion-bushel carryover on corn and a soybean carryover of more than 550
million bushels. Seven Iowa cooperatives used condo storage last year, and many
more are looking at this option for 2006, said Hauschel, who said Heartland has built
almost 2.3 million total bushels of condo storage in the last two years at Rippey,
Panora and Malcom.
“The grain condo storage concept is catching on around the Corn Belt,”î said Roger
Ginder, an ag economist at Iowa State University. “It provides advantages to both the
farmer and the elevator.î”
Building on a proven strategy
While condo storage is fairly new to Iowa, it’s not a new idea in other parts of the
country. Joe Anniss, general manager of MaxYield Cooperative in northwest Iowa, said
rice cooperatives in Texas and Louisiana have used condo storage since the 1940s.
MaxYield is selling 1 million bushels of condo storage and plans to have the storage in
place for this fall’s harvest. “Farmers’ interest in this opportunity has been
phenomenal,Ӕ Anniss said.
With condo grain storage, farmers pay only for the storage they need, so they’ll know
their actual cost of storage. In addition, they’re guaranteed space at the elevator.
Farmers who own a share in a grain condo also get the tax advantage of depreciation.
If producers lease farmland, condo storage allows them to own storage space with
reduced risk, Anniss added.
At Heartland Cooperative, last year’s grain condo program cost farmers $1.15 a bushel
for the initial cost plus an annual service fee of 4.6 cents per bushels to pay for
electricity, service work on the bin, taxes and insurance. The 4.6-cent fee was locked in
for three years.
Since a condo grain storage investment is typically a salable asset, farmers can
transfer their share if they want to get out or retire. “A grain condo share is a more
liquid asset than an on-farm grain bin,î” Ginder said. “As the price of steel has
increased dramatically in the last few years, a share can also be a more affordable
option than a bin.î”
Condo storage also impacts grain quality. “Since grain is moved less frequently and is
put under professional management in a grain condo arrangement, the risk for quality
loss is shifted from the farmer to the co-op,î” Ginder said. Condo storage can also
reduce the farmer’s storage costs, since the cooperative handles all bin maintenance
and repairs.
At MaxYield Cooperative, a farmer’s condo storage share can be emptied and refilled.
“If you have 75,000 bushels of on-farm grain, for example, condo storage allows you to
move the grain off the farm according to your timeframe, whenever it’s convenient,î”
Anniss said. “You’re not forced to sell grain during harvest when basis is always
widest.î”
MaxYield has specified that farmers must be a Class A member of the cooperative and
live in Iowa to take advantage of the co-op’s condo program. With MaxYield’s condo
storage, grain qualifies for all government support and loan programs, and the grain is
protected through the Iowa Grain Indemnity Fund Act.
Creating a win-win
Condo storage also provides benefits for the cooperative, Hauschel said. “We could
add more storage by using the co-op’s capital and borrowing more money, but it
wouldn’t be fiscally responsible. Grain condo storage offers a viable solution for
everyone.î”
Condo storage can also help cooperatives deal with harvest-time storage challenges
posed by the railroads. “Five years ago you could schedule trains much easier than
you can now,”î Anniss said. “Today the railroads are more interested in hauling
industrial products that provide more revenue per mile than grain.î”
Before purchasing a grain condo share, find out how the title can be changed, what
happens when the share goes into estate and other key details, Ginder advised. “Grain
condo leases are just like any other contract. Know the specifications of the legal
document you are you signing.”