Analysis of a Large
On-Farm Grain
Storage & Handling
Facility
By: Jeffrey Berg, ARA, ASA, MRICS
1
Overview
This analysis will demonstrate the steps
taken, methods used, and information
gleaned in the course of the analysis
and comparable sale write-up of a
large on-farm grain storage and
handling facility.
2
Research the sale.

Sources used:
 county
assessor
 county recorder
 internet searches
 local appraisers
 county plat book
 AgriData, Inc.
3
Information Obtained
Sale date: September 2006
 Sale price: $900,000
 6 acre building site w/improvements
 USDA payments of over $3,000,000
received from 1995 to 2005.
 Other information: buyer, seller,
property type, document number,
assessed value, parcel number, etc.

4
Confirming the sale.

Seller interview:
 Motivation
of buyer & seller.
5
Confirming the sale.

Seller interview:
 Motivation
-
-
-
of buyer & seller.
The seller decided to exit farming after
encountering problems with the USDA
regarding payment limitation rules.
Farm equipment auctioned in 12-06.
HQ grain bin site and the HQ home sold
in 9-06 along with additional bin site and
home.
The buyer expanded operations into this
area with this purchase.
6
Confirming the sale.

Seller interview:
 Motivation
of buyer & seller.
 Size of the farming operation.
7
Confirming the sale.

Seller interview:
 Motivation
of buyer & seller.
 Size of the farming operation.
- As operated by the seller, the farm HQ
served an 8,000 acre farming operation.
- Buyer was able to lease roughly 1,000
dry tillable land acres and 7,000 irrigated
tillable acres.
8
Confirming the sale.

Seller interview:
 Motivation
of buyer & seller.
 Size of the farming operation.
 Tillable land cash rental agreement & bin
site sale.
9
Confirming the sale.

Seller interview:
 Tillable
land cash rental agreement & bin
site sale.
- The sale price reported in the courthouse
was $865,000—slight difference due to
accountants handling of part of sale.
Actual sale price is $900,000 (considered
arms-length). Cash rental rates in area
at time of sale were $100 per acre for dry
tillable and $125 per acre for irrigated
tillable (considered fair market).
10
Confirming the sale.

Seller interview:
 Motivation
of buyer & seller.
 Size of the farming operation.
 Tillable land cash rental agreement & bin
site sale.
 Sale of the house on-site.
11
Confirming the sale.

Seller interview:
 Motivation
of buyer & seller.
 Size of the farming operation.
 Tillable land cash rental agreement & bin
site sale.
 Sale of the house on-site.
- Sale of the farm HQ house was negotiated
at the same time as the on-farm grain
storage facility but sold in a separate
transaction to same buyer for $300,000.
12
Inspection of the facility.



Discussion with grain facility
supplier/contractor.
History of construction, facility age
“Farmer” storage vs. “commercial” storage
 Augers
vs. drag conveyors
 Concrete stem wall height
 Reclaim tunnels
 Drying capacity and aeration systems
 Fill & reclaim capacity
 Receiving capacity
13
“Farmer” vs. “commercial” storage
Centrifugal aeration fans
Vane axial aeration fan.
14
“Farmer” vs. “commercial” storage
Reclaim gates/sumps & reclaim
paddle conveyor in tunnel.
Incline unload screw augers
15
“Farmer” vs. “commercial” storage
Concrete stem wall, reclaim
tunnel, reclaim paddle
conveyor.
Reclaim tunnel (L), stem wall
16
“Farmer” vs. “commercial” storage
Stem wall paddle reclaim
conveyor
Interior of a “paddle” or
chain “drag” conveyor
17
“Farmer” vs. “commercial” storage
Screw conveyor
Bean ladder in a dry edible
bean storage bin.
18
Inspection of the facility.
View of farm HQ – house (r) purchased separately.
19
5,000 bu
OH
Friesen bin
20
Inspection of the facility.
Farm headquarters and bin site.
21
Inspection of the facility.
Dwelling purchased separately.
22
Inspection of the facility.




Buildings and bins constructed from 1995
to 2000.
Shop - 50x70x18, heated concrete floor,
24x70 parts lean, 12x40 office lean, pole
frame const, insulated, lined, colored steel
exterior.
South equip shed – 60x104x17, pole frame,
concrete floor, no insulation or heat,
colored steel exterior.
North equip shed – 60x160x17, pole frame,
gravel floor, no insulation or heat, colored
steel exterior.
23
Inspection of the facility.
50x70x18 heated shop & office.
24
Inspection of the facility.
South equipment shed – 60x104x17.
25
Inspection of the facility.
North equipment shed – 60x160x17.
26
Inspection of the facility.

Bins:
 (1)
30’; (1) 33’ & (2) 36’ diameter Sioux
bins, 65,000 bu total capacity, full floor
aeration, filled by u-trough auger (filled
from receiving leg), portable auger
reclaim.
 (2) 48’ diameter Sioux bins, 100,000 bu
capacity each, full floor air, (2) centrifugal
fans per bin, filled from legs, auger
reclaim, short concrete stem walls, auger
conveyors back to receiving pit.
27
Inspection of the facility.
Larger bins – note side draws.
28
Inspection of the facility.

Bins:
 (2)
60’ diameter 150,000 bu Brock bins,
full floor aeration, auger unload, filled
from legs, (2) centrifugal fans per bin,
short concrete stem wall
 (1) 12,000 bu hopper bin used as “wet”
holding bin for dryers
 (1) OH 5,000 bu Friesen hopper bin over
driveway for load-out.
 Larger bins have sidedraws for truck
loading.
29
Inspection of the facility.
Bin facility – row of smaller bins (L) & larger bins (R).
30
Inspection of the facility.

Grain Handling Equip:
 Legs include a 10,000 bph rec. leg & 7,000
bph leg (serves as “wet” & “dry” leg for dryer).
 Valves are used to direct grain to bins.
 10x10x150 tower supports legs & spouting.
 Receiving pit is shallow w/10,000 bph drag
conveyor to rec. leg.
 (2) SuperB dryers (1,000 & 1,200 bph) used
for corn drying – “heat only”.
 12,000 gallon LPG tank inc. in drying system.
 Private water well and septic sewer system.
 Good farm storage but not commercial quality.
31
Inspection of the facility.
Receiving leg & pit.
Receiving pit area; 5,000
bu OH bin and dryers
32
Results of inspection.
Improvements
Structure
Size
Eff
Age
Shop SF
5,660
10
G
G
Equip Shed (SF)
6,240
10
G
G
Equip Shed (SF)
9,600
10
G
G
Gr. Bin (bu)
835,000
10
G
G
Hopper Bins (bu)
17,000
10
G
G
Dryer (bph)
2,200
10
G
G
Con.
Util
33
Cost Approach
Improvements
RCN
Structure
Size
$/Unit
Total
Shop SF
5,660
$ 22.97
$ 130,000
Equip Shed (SF)
6,240
$
9.62
$
60,000
Equip Shed (SF)
9,600
$
6.25
$
60,000
Gr. Bin (bu)
835,000
$
1.50
$ 1,250,000
Hopper Bins (bu)
17,000
$
2.94
$
Dryer (bph)
2,200
$ 68.18
50,000
$ 150,000
$ 1,700,000
Calculating RCN’s for buildings, bins,
grain handling/drying equipment
34
Cost Approach
Improvements
Structure
Size
Dep %
Dep
Rate
Shop SF
5,660
46%
4.6%
Equip Shed (SF)
6,240
58%
5.8%
Equip Shed (SF)
9,600
42%
4.2%
Gr. Bin (bu)
835,000
49%
4.9%
Hopper Bins (bu)
17,000
40%
4.0%
Dryer (bph)
2,200
50%
5.0%
Abstracting depreciation rates from the sale.
(Total accrued deprecation rates.)
35
Cost Approach
Improvements
Structure
Size
Annual
Dep Rate
Physically
Dep RCN
Shop SF
5,660
2.86%
$
92,300
Equip Shed (SF)
6,240
2.86%
$
42,600
Equip Shed (SF)
9,600
2.86%
$
42,600
Gr. Bin (bu)
835,000
3.33%
$ 837,500
Hopper Bins (bu)
17,000
3.33%
$
Dryer (bph)
2,200
5.00%
$ 75,000
$ 1,123,500
33,500
Calculating physical depreciation in the sale.
(Individual causes of deprecation.)
36
Cost Approach
Calculation of Economic Obsolescence:
RCN
$ 1,700,000
Phy. Depr
34% $ 576,500
Phy. Depr'd RCN
$ 1,123,500
Func. Obsol.
0%
$
-
Phy. Func. Depr'd RCN
$ 1,123,500
Building Contribution
$ 870,000
Economic Obsol.
22.56%
$ 253,500
Economic obsolescence of 23% is indicated by this sale.
37
Sales Comparison Approach
Improvements
Cont. Value
$/Unit
Total
Structure
Size
Shop SF
5,660
$ 12.37
$
70,000
Equip Shed (SF)
6,240
$
4.01
$
25,000
Equip Shed (SF)
9,600
$
3.65
$
35,000
Gr. Bin (bu)
835,000
$
0.76
$ 635,000
Hopper Bins (bu)
17,000
$
1.76
$
30,000
Dryer (bph)
2,200
$ 34.09
$
75,000
38
Income Approach
Income: (Estimated Lease Rate)
Grain Storage
(3) Shop Bldgs.
Total Income
835,000 bu x $0.15/bu
12 mo x $1,000/mo
= $ 125,250
= $
12,000
$
137,250
39
Income Approach
Expenses:
Insurance
R.E. Taxes
Maintenance
Management
Reserve for Rep.
(8% of gross income)
(6% of gross income)
(3% of gross income)
=
=
=
=
=
$
$
$
$
$
Total Expenses
$
NOI
=
OAR
7,000
10,000
11,000
8,000
4,000
40,000
$97,250
$97,250 / $900,000 = 0.1081 or 10.81%
40
Conclusion
Only appraise these special use
facilities if you’re willing to invest the
time to become truly competent.
This brief overview is not enough to
make you competent in the appraisal
of this type of facility.
41
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