Grain Bin Analysis: Program Overview
The Grain Bin Analysis1 program aids in making decisions about the addition of on-farm storage for corn
and soybeans. It considers the need for and expenses of on-farm storage, as well as the costs for
hauling grain to the local elevator. The program requires owner information, grain bin capacities, and
drying/storage assumptions for both the elevator and on-farm storage in order to generate the analysis
reports. The program generates three reports: (1) cash flow projection and return on investment, (2)
operating inflows and outflows, and (3) internal rate of return.
The information needed to run this program can come from:
1.
An individual’s farm records
2.
Chicago Board of Trade (link found at www.farmdoc.uiuc.edu)
3.
Loan information from lender
4.
Grain bin installation estimate from builder
5.
Grain elevator bid sheet
6.
Terminal price sheets
7.
Insurance claims
To make use of this program, you must be able to provide owner information, grain bin building estimates,
and production assumptions. The program requests the following information:
A.
Owner Information:
Name, crop share, discount rate, marginal tax rate, down payment, bin loan interest rate, bin loan
term in years, crop acres and yield that will occupy the proposed bin
B.
Grain Bin Capacities:
Crop to be stored, diameter in feet, # of rings, drying floor, stirator, ring dimensions, fill cone,
compaction factor, estimated costs, salvage value.
C.
Drying/Storage Assumptions:
Production comparisons, drying/storage and truck/handling costs, trucking/handling costs for
elevator and on the farm, long range price outlook, and other ownership costs.
1Co-Authored
by Brian Pulley, Illinois FBFM Field Associate, Pioneer Association
Navigating the Grain Bin Analysis program
The Grain Bin Analysis program has a main menu with buttons that helps the user move between input
screens and reports, as well as navigation tabs. The main menu is shown below.
The main menu contains 8 buttons that help the user move between the input screens and reports. Each
button represents a different Excel spreadsheet found within the grain bin analysis program.
The owner information button displays the worksheet where all applicable information about the owner
and the owner’s crops to be stored on-site is entered.
The grain bin capacities button displays the worksheet where entries include a description of each grain
bin to be added to on-site storage, as well as additional costs incurred with the bin installation.
The dry/storage assumptions button displays the worksheet where storage, handling, and prices are
entered for the elevator and farm.
The cash flow analysis/return on investment button displays the output report that provides a yearly
cash flow for the maximum life of the bins analyzed, as well as the calculated return on investment.
The operating outflows & inflows button displays the output report of before-tax operating outflows and
inflows reported by the following categories: increase expenses, increase income, and reduce expenses.
The internal rate of return button displays the output report that provides before- and after-tax internal
rate of return for both with and without a residual value.
The analysis summary button displays the output report that contains a project summary, summary of
cash flows, depreciation savings, internal rate of return before financing, and rate of return on investment
after financing costs.
The print analysis button automatically prints the analysis summary, cash flow projection and return on
investment report, internal rate of return without financing report, operating outflows and inflows report,
and all of the input reports.
There are tabs at the bottom of the Excel spreadsheet screen that help navigate the user between the
input and output worksheets. Click on the name of the screen you wish to view.
The owner information tab displays the owner information input worksheet, as does the Owner
Information button described above.
The dry & store assumptions tab displays the assumptions input worksheet, as does the Dry/Storage
Assumptions button described above.
The inflows & outflows tab displays the operating output report, as does the Operating Outflows &
Inflows button described above.
The analysis summary tab displays a summary output report, as does the Analysis Summary button
described above.
The cash flow tab displays the cash flow output report, as does the Cash Flow Analysis/Return on
Investment button described above.
The internal rate of return tab displays the internal rate of return output report, as does the Internal Rate
of Return button described above.
How to use the Input Sections
To explain the input required to use this program, an excerpt of Joe Sample’s farming operation has been
developed as an example. The example is presented such that the input sections are filled in for you.
Note: Only enter input areas shaded by yellow. The other cells are calculations using formulas that include the
inputs. These formula cells are protected so that formulas cannot be accidentally changed. If you click on a
“protected” cell, you will receive the following message:
To remove this message from the screen, click on the “OK” button.
Input Worksheet 1: Owner information
This section requires the following information: user’s name, crop share, marginal tax rate, down payment,
loan interest rate, and length of loan.
The “before-tax” discount rate (dr) represents the opportunity cost of money. For operations with debt, the
discount rate may be a blend of debt costs and equity capital. The blended rate may also need to be adjusted
to reflect the risk inherent in the investment. For farms with no debt, the discount rate may be the return of offfarm investments, such as a CD rate.
To estimate dr, Joe’s example is used. If Joe has an operating loan being charged an interest rate of d (6%)
and has a savings account earning interest e (2%), the “blended” before-tax discount rate may be found using
the following equation: d x (debt/asset) + e x (equity/asset) = dr or 6% x (.5/1) + 2% x (.5/1) = 4%.
The after-tax discount rate (atdr) is calculated for you. It is calculated using the discount rate (dr) and the
marginal tax rate (mtr) with the following equation: atdr = dr x (1-mtr). For example if Joe’s interest rate on a
loan is 8.5% and his marginal tax rate is 20%, then his after-tax discount rate is calculated as follows: .04(1.20) = .032 or 3.2%.
The second part of this worksheet calculates production, proposed storage capacity, and overrun capacity. To
do this, it requires entries for the # of acres and yields for the corn and soybeans to be stored in the new bins.
Example: Joe Sample
Joe Sample just cash rented an additional 100 acres. He was told that the average corn yield for this property
was 150 bushels per acre. He plans to store the entire crop on his farm; however, he needs to build an
additional grain bin. Joe’s bank approved him for a 10-year loan at an interest rate of 8.5% assuming he
provides 25% of the total cost as a down payment. Joe’s marginal tax rate is 20% and he has an account
earning 4% interest. Joe’s information is entered below.
Input Worksheet 2: Grain Bin Capacities
This worksheet collects information about the estimated dimensions and costs of each new grain bin, as well
as any additional costs for the preparation of the installation. The worksheet contains seven rows for up to
seven bin entries. For each bin, specify if it will be used to store corn (C) or soybeans (S). Then enter the
diameter, # of rings, dry floor & stirator space, compaction factor, and ring width. Also, be sure to specify if
you will fill the cone by entering a “Y” (yes) or an “N” (no). Finally, enter the estimated total cost for the bin.
Below the bin entries are blanks labeled XXXXXXXX. Here, enter any additional costs incurred with the
installation. For example, electrical wiring may need to be installed.
Below the entry section, a “cost per bushel” section calculates a cost per bushel for the total expense of the
installation of new bins and for the bin expense only.
In this section, you may enter a Salvage Value, or an estimate of the value of the property at the end of its
useful life.
Life (years) refers to the useful life of the bin for depreciation purposes. According to MACRS, a grain bin has
a 15-year useful life.
Example (continued)
Joe has received an estimate for the grain bin he’d like to install for storing corn. The bin has a diameter of 36
feet; 8 rings that are 32 feet wide each; 12 inches of dry floor space; and 30 inches of stirator space. The
compaction factor is 5% and Joe does not plan to fill the cone. The estimated total cost of the bin is $25,500.
The installation expenses include: $2,000 for electrical wiring and $1,500 for site preparation. The bin has no
salvage value after 15 years.
In this example, the total cost for the bin is $29,000. The cost per bushel for the entire cost of the bin and
installation equals $1.90. The cost per bushel for the bin equals $1.67.
Input Worksheet 3: Production Comparisons for Elevator and Farm
Harvest Assumptions
Harvest moisture refers to the percentage of moisture in the grain at the time it is being harvested.
Don’t use an excessively high or low number. A 22 to 23% harvested moisture is average.
Additional harvest loss represents a percentage reduction in yield. This may be due to a slower
harvest because of hauling distances and/or long lines at the elevator. Today, however, elevators are
often faster than farm facilities. If this is the case, enter a zero or a negative harvest loss in this cell.
An additional example may be the idea that those who store grain at the elevator, put off harvest until
moisture levels are lower (ie. 15-16%), so to reduce drying costs, while those who store grain on site are
more apt to harvest grain earlier at a higher moisture content (ie. 22%). Those who harvest grain with a
high moisture level can dry grain on site to whatever moisture content they wish, avoiding the “shrink
expense”, and ending up with more bushels to sell in the long run.
Production Comparisons
The amount of dry and/or wet bushels refers to the number of bushels before and after drying takes
place.
For soybeans, the calculations consider additional harvest loss. For example, the dry bushels for the
elevator location are the percentage of grain that is not lost due to harvest loss conditions (ie. amount of
grain at farm multiplied by 1- harvest loss %).
For corn, the calculations consider the harvest moisture, shrink to factor, and harvest loss. The dry
bushels at the farm location are calculated based on the number of acres and bushels produced in Input
Worksheet 1: Owner Information, while the wet bushels assume the shrink factor and harvest moisture.
For example, the shrink factor is calculated first. The calculation is 100 multiplied by the shrink factor
which is multiplied by the percentage grain shrinks in storage. (ie. Harvest moisture minus shrink corn
to). Subtract this answer from 1. Then the number of dry corn bushels is divided by the shrink factor.
Shrink Assumptions
Shrink refers to the reduced weight of grain as it is dried. Shrink is important to consider when
purchasing a grain bin because on site storage may end up a lower cost alternative to storing at an
elevator. By storing grain on site, you avoid the “shrink expense”, as well as have control of the moisture
content of the grain. Typically, in order to store corn and soybeans, a predetermined percentage of
moisture is allowed.
Shrink corn to refers to the desired moisture content allowed in the corn after drying. For example, an
elevator may require that all corn be dried to a 14% moisture content, while a farmer may prefer to dry the
corn on-site to a 15% moisture content.
The shrink factor refers to the percentage grain will shrink while in storage over time. Note: typically, an
elevator calculates 14% dry moisture on a 1.4 shrink factor. However, real shrink is probably closer to 1.2
and a producer may dry the grain to only 15%. Be sure to represent the producer’s actual practices in
this case and not what is typical. If a producer dries to 13%, the grain system will not deliver the
projected bushels.
To estimate your shrink factor, you may use the following equation.
Volume Shrink Factor (%) 
Moisture for Sale (%) - Moisture for Storage (%)
 100
100 - Moisture for Storage (%)
For example, if grain can be sold at 15.5 percent, but grain will be shrunk to 14 percent
moisture in storage, the volume shrink factor is 1.74 percent.
1.74% 
15.5 - 14
 100
100 - 14
Example (continued)
Joe harvests corn with 25% moisture content. If Joe transports the grain to the elevator, he estimates
he’ll have an additional harvest loss of 1% due to long lines. On Joe’s farm, corn is shrunk to 15% with a
1.2% shrink factor, while the elevator shrinks corn to 14% with a shrink factor of 1.4%.
Note: Only the inputs related to corn are filled in because Joe’s bin is for storing corn in this analysis.
Input Worksheet 4: Drying, Storage, Truck, and Handling Costs
Drying Costs for the elevator can be found on the elevator’s rate sheet, while the on-farm drying costs
must be estimated. A rule of thumb for estimating on-farm drying costs is to figure about 8 cents of LP
and 3 cents of electricity per wet bushel when LP costs 70 cents. Newer dryers may be more efficient, so
you’ll have to adjust your figures accordingly.
Storage Minimum and Storage Monthly costs can be found on the elevator’s rate sheet. The Minimum
to Date is the date that minimum storage will end. Average Sale Date is an estimate of the mid-point of
sales on the calendar. The Average Storage Cost is the sum of the minimum storage cost plus the total
monthly storage cost based off of the average sale date and when minimum storage ends.
All Trucking Costs are recorded as a per bushel cost. The From Field to Bin entry should include grain
transfer costs and the From the Bin to the Elevator/Terminal should include the cost of loading the
truck.
Terminal Corn and Bean Premiums are the premium price per bushel for specialty crops. If this
analysis is not for specialty crops, enter a zero in these boxes.
Example (continued)
Joe went to the local elevator to pick up the elevator’s rate sheet. It listed a $0.16 per bushel drying cost
for corn; a minimum storage fee of $0.13 per bushel ending February 1, 2003; and after February 1,
2003, a monthly storage fee of $0.025 per bushel. The elevator estimates it’s average sale date to be
March 1, 2003.
Joe calculated his on-farm drying costs for corn to be $0.13. As did the elevator, Joe considers his
average sale date to be March 1, 2003.
Joe estimates his trucking costs from the field to the elevator and bin to be $0.09 and $0.05 per wet
bushel, respectively. However, his trucking cost from the bin to the elevator/terminal is $0.12 per dry
bushel. The elevator/terminal pays Joe an additional $0.11 per dry bushel for his specialty corn.
Input Worksheet 5: Long Range Price Outlook and Other Ownership Costs
The Long-Range Price Outlook information for corn and soybeans can be found in many places. The
farmdoc website (www.farmdoc.uiuc.edu) provides links to the Chicago Board of Trade, as well as local
terminals. The price to choose is the one listed for the month you plan to sell your crop.
Other ownership costs, such as repairs, taxes, and insurance are recorded here also. Information
about these costs can be found at the “Ag Decision Maker” website
(http://www.extension.iastate.edu/agdm/homepage.html)
Example (continued)
Joe went to the farm.doc website and accessed the Chicago Board of Trade futures prices. He recorded
the price of corn to be $2.00.
Joe estimated his repairs and taxes to equal $3.50 and $0.70 per $100 of initial cost, respectively. His
bin and equipment insurance costs $0.70 per $100 of initial cost, while his grain theft insurance costs
$0.35 per $100 of grain inventory.
REPORTS
The Grain Bin Analysis program provides four reports giving detailed summaries for the additional on-farm
storage in the analysis. The reports generated by the program are Operating Outflows and Inflows, Cash
Flow Projection and Return on Investment, Internal Rate of Return, and Analysis Summary. Reports may be
accessed in two ways. From the main menu, a user can click on the desired report. Alternatively, a user
may click on sheet tabs located at the bottom of the Excel screen. The sheet tabs are explained in the
introduction section of this documentation.
Report 1: Operating Outflows/Increased Expenses
The operating outflows are referred to as “Increased Expenses” because they are costs that must be paid in
order to operate the farming operation. In this report, the “Beginning Value” (BV) refers to the total cost of
the grain bin installation calculated in Input Worksheet 1.
The repairs expense is calculated by dividing the BV by 100 and then multiplying it by amount entered for
repairs in the Other Ownership Costs input section found in Input Worksheet 5. Joe’s total repair expenses
equal $1,015.
The tax expense is calculated by dividing the BV by 100 and then multiplying it by amount entered for taxes
in the Other Ownership Costs input section found in Input Worksheet 5. Joe’s total tax expenses equal
$203.
The insurance expense is calculated in two parts.
 The equipment and bin insurance is calculated by dividing the BV by 100 and then multiplying it by
the amount entered for insurance (bins & equipment) in the Other Ownership Costs input section
found in Input Worksheet 5. Joe’s equipment and bin insurance expense equals $203.
 The grain theft insurance is calculated by first, calculating the value of grain in storage. This is
calculated by multiplying the price entered in the Long Range Price Outlook section for the crop by
the amount of crop in storage. Secondly, the value of the grain figured is divided by 100. This is
multiplied by the amount entered for insurance (grain theft) in the Other Ownership Costs input
section found in Input Worksheet 5. Joe’s grain theft insurance expense equals $105.
The utilities expense is calculated in two parts. First, the amount of wet bushels that you are responsible for
must be figured. This is calculated by multiplying the amount of wet bushels harvested by the crop share
percentage. Then, the amount of wet bushels is multiplied by the amount entered for the on-farm drying
costs found in Input Worksheet 4. In Joe’s example, 100% of the corn crop is on a cash rent basis. Thus, he
is responsible for 100% of the crop costs. Joe’s utilities expense equals $2,216.
The trucking and handling expense is calculated in two parts: field to bin and bin to elevator/terminal. The
field to bin expense is calculated by multiplying the amount of wet bushels harvested by the field to bin per
wet bushel entry in Input Worksheet 4. Joe’s field to bin expense equals $852. The bin to elevator/terminal
expense is calculated by multiplying the amount of dry bushels by the bin to terminal per dry bushel entry in
Input Worksheet 4. Joe’s bin to terminal expense equals $1,800.
Joe’s total operating outflows for this analysis equal $6,394.
Report 2: Operating Inflows/Increased Income
The operating inflows are referred to as “increased income” because these categories help the farming
operation earn money. For example, a reduced harvest loss means that transporting grain to the elevators
was more efficient than in the past, thus, more grain was able to be harvested which provided for more
income to be earned.
The reduced shrink and harvest loss is calculated by taking the amount of on-farm dry bushels minus the
elevator dry bushels, multiplied by the percentage of crop share. This answer is the amount of crop you
have on the farm versus if you had stored it at the elevator. To calculate the financial gain from storing on
site, the answer is multiplied by the long-range price entry in Input Worksheet 5. Joe has increased his
income by $1,448.
The direct delivery premium is the amount earned for delivering specialty/premium crops to the
elevator/terminal. To figure the amount earned, multiply the number of dry bushels stored on-site by the
premium per dry bushel entry in Input Worksheet 4. Joe’s specialty crops earned him an additional $1,650.
Report 3: Operating Inflows/Reduced Expense
The operating inflows are referred to as “reduced expense” because these categories provide an
understanding of the amount of money saved by storing grain on-site rather than taking the grain to the
elevator at harvest. For example, the elevator drying expense is not necessary when storing on the farm.
The elevator drying expense is the amount of money it would have cost to dry your grain at the elevator.
This is calculated by multiplying the number of wet bushels at the elevator by your share of the crop. This
answer is multiplied by the elevator’s drying cost entry found in Input Worksheet 4. Joe will save $2,700 in
elevator drying expenses by storing grain on site.
The elevator storage expense is the amount of money it would have cost to store grain at the elevator. This
is calculated by multiplying the number of dry bushels at the elevator by your share of the crop. The answer
is multiplied by the elevator’s average storage cost entry found in Section 2 of the Drying/Storage
Assumptions input worksheet 4. Joe will save $2,141 in elevator storage expenses by storing grain on site.
The trucking to elevator expense is the cost of hauling the grain to the elevator at harvest. This is
calculated by multiplying the number of wet bushels harvested by the field to elevator-trucking & hauling cost
entry found in Input Worksheet 4. Joe will save $1,519 in hauling expenses by storing grain on site.
Joe’s total operating inflows (Report 2 and Report 3) for this analysis equal $9,458. This amount refers to
the additional expenses Joe would have if he stored grain at the elevator.
Summary of Inflows and Outflows (Reports 1, 2, 3)
By combining the total inflows, or reduced expenses, found in Report 2 and Report 3; and the total outflows,
or increased expenses, found in Report 1, Joe would have a total savings of $3,064 if he purchased a grain
bin rather than storing grain at the elevator.
Report 4: Cash Flow Projection and Return on Investment
The cash flow projection and return on investment report provides an annual breakdown of the following:
projected payments, projected cash flow, interest tax savings, cash flow for the year, and a cumulative
cash flow. Note: In this report, a number with parenthesis around it refers to a negative number.
Projected payments are outflows of cash and are represented as negative numbers, since you are
paying for something. Outflows include down payments, as well as loan payments. The program
calculates the loan payments based off of the inputs: interest rate, length of loan, and amount financed.
Joe paid a $7,250 down payment and his yearly loan payments are calculated to be $3,315 for year 1
through year 10.
Projected cash flows are the sum of the total cash inflows and outflows for the initial project cost, after
tax annual inflows, and depreciation tax savings. This number can be either positive or negative,
however, positive is preferred because it shows that more money has been acquired/saved than what has
been spent.
Interest tax savings represents the tax savings due to loan payments. For this calculation, if the
projected payment is negative, then the interest tax savings is the sum of the cost of the project plus the
projected payment in the previous year. This value is multiplied by the interest rate to represent the tax
savings. This value can be both positive and negative, however, positive is preferred as it means you
have a tax savings.
Cash flow for the year can be both positive and negative, however, positive is preferred. It is common
to have a negative cash flow at the beginning of an analysis if a large down payment is paid.
The cumulative cash flow is the sum of the yearly cash flows. It will be negative until you are done
making payments or the cash inflows become greater than the payments. In this example, a positive
cumulative cash flow does not exist until year 14 of the 15-year analysis. This is important for a decision
maker to analyze because it shows the length of time it takes before the investment will have a positive
return.
The report also states when the cumulative cash flow peaks, or reaches the largest outflow throughout
the analysis timeline. This is important to a decision maker because it provides a preview as to the yearly
cash outflows, which may be important when planning to purchase additional assets in the future.
This report provides an investment yield including financing, or return on investment. This number
represents the interest rate that equates the net present value of the cash flows to equal zero. A positive
number means that you have received more inflows than outflows, while a negative number means just
the opposite. The return on investment is calculated by discounting the cash flows back to the present
and summing their values.
For example, if you pay a down payment of $1,000 and make a payment of $1,300 in 1 year, what is the
rate of return? The equation is IRR = - down payment + (payment/1+i) or 1+ i = payment/down payment).
With the numbers plugged into the equation, we see that the IRR is 30%. (1+ i = (1300/1000) = 0.3) In
Joe’s example, he earned a 3.79% return on his original investment of building a grain bin.
Report 5: Internal Rate of Return
The internal rate of return without financing report provides a look at the yearly cash flows without
accounting for debt payments. This type of report allows the user to evaluate what the returns outside of
how the investment is financed.
Project cost is the total cost of the project that is calculated in the input section called grain bin
capacities.
After tax annual inflow is the calculated in the Analysis Summary report by summing the annual
outflows and annual inflows, and subtracting the tax obligation.
Depreciation tax savings is the amount of tax savings for that year due to depreciation. The numbers in
this report are taken from the Analysis Summary in Report 5.
Net cash flow is the sum of the cash flows for each year.
Discount factor represents the rate at which the value of the property decreases. It is calculated by the
following equation: 1/(1+ after tax discount rate) number of year in the analysis. The “number of year in the
analysis” is a raised power of the one plus after tax discount rate. For example, in year 3 of the report,
the discount rate is: 1 / (1 + 0.032)3 = 0.910.
The present value is calculated by multiplying the net cash flow by the discount factor.
The after tax internal rate of return (IRR) is the rate of return on the investment after accounting for a
tax obligation/savings that makes the net present value of the grain bin equal to 0. This value analyzes
both the inflows/outflows of the bin, as well as tax implications. The return on investment is calculated by
discounting the cash flows back to the present and summing their values. A larger, positive rate of return
is preferred. In this example, the after tax IRR is 5.52%. This means that by storing grain on site, Joe
was able to improve his financial situation by earning a return on his investment of 5.52%. The positive
return is due to the reduced expenses in elevator drying and storage costs, as well as transportation
costs, however, with tax implications, the return is reduced.
The before tax internal rate of return (IRR) is the rate of return on the investment that makes the net
present value of the grain bin equal to 0. This value analyzes only the inflows/outflows of the bin. This
number represents the interest rate that equates the net present value of the cash flows to equal zero.
The return on investment is calculated by discounting the cash flows back to the present and summing
their values. A larger, positive rate of return is preferred. In this example, the before tax IRR is 6.9%.
This means that by storing grain on site, Joe was able to improve his financial situation by earning a
return on his investment of 6.9%. This positive return is due to the reduced expenses in elevator drying
and storage costs, as well as transportation costs.
The residual value is the “salvage value” entered in the Owner Information input section. In this
example, Joe’s grain bin does not have a salvage value, so the IRR’s are unchanged. If a salvage value
is entered, the IRR with the salvage value would be the rate of return on the investment that makes the
net present value equal to the salvage value.
Report 6: Analysis Summary
The analysis summary shows the (1) Project summary, (2) Computation of cash flows, (3) Depreciation
savings, (4) Internal rate of return before financing, and (5) Rate of return on investment after financing
costs.
The project summary shows the cost of the project, the amount financed and the depreciable amount. It
also explains the depreciation method and useful life.
The computation of cash flows section is explained in Report 1, 2, & 3.
The depreciation savings section displays the deductible depreciation allowed in each year of the
analysis, as well as the depreciation tax savings for that year.
The internal rate of return before financing section is explained in Report 5.
The rate of return on investment (after financing costs) section is explained in Report 6.