Ethanol Producer Magazine, ND
08-30-07
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
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.
t'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 drawdown 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
sretkaschill@bbibiofuels.com or (701) 746-8385.