Grain storage value comparison

An Alberta Ag report crunches the numbers to help you make bin buying decisions

As farms increase in size and average yields increase, farmers are considering adding new storage facilities or replacing older ones. There are a number of different options.

Corrugated bins have long been a familiar sight on Prairie farms and represent the tried and true method, according to Ryan Furtas, a research economist with Alberta Agriculture and Forestry.

Smoothwall bins are being used more often, particularly in bin yards, Furtas says. Grain bag storage systems are the new kids on the block, having really taking off in popularity in the last decade or so.

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The question for growers is which grain storage option delivers the best value?

Grain storage costs can vary significantly depending on whether the storage is temporary or fixed solution, and the types of structures used. Numbers in the table below come from a recent report by Alberta Agriculture and Forestry called “Grain Storage: Cost Comparisons.”

The first three options shown in the table are 5,000-bushel steel bins either on gravel or concrete bases. The study didn’t calculate the costs of larger bins.

For these three different kinds of structures, purchase price along with site preparation and set-up costs represent the biggest portion of the total investment cost.

grain-storage-cost-comparison

Grain bagging systems don’t require fixed structures but do involve a sizable investment in bagging and extractor equipment.

In addition to facilities and equipment, farmers must be mindful of other cost considerations when choosing a grain storage system.

“By accounting for depreciation, spoilage, interest, repairs and maintenance, an operation can evaluate the entire cost of the storage options being considered,” states the Alberta Ag report.

According to the report, the cost of financing should not be overlooked: “If the investment in a storage system has a high upfront cost and money needs to be borrowed, a substantial amount of cash can be lost to interest. The high cost of interest on a system may not make sense for a particular operation. As well the lost opportunity of using that money for an alternative investment needs to be considered.”

Another key consideration is depreciation, the decrease in potential economic value as capital assets age. For its report, Alberta Agriculture calculated depreciation using Canadian Revenue Agency classes of depreciable property.

Other aspects when assessing storage options are salvage value (the part of the investment that can be recouped through resale) and the cost of maintaining facilities and equipment.

Furtas says it’s important to consider repair and maintenance costs at the start because some storage systems are relatively maintenance free while others require more upkeep. He notes the latter applies to grain bagging systems because there is equipment involved.

“With the grain bagger, you have moving parts. It could be anything from a flat tire to something more significant going wrong that’s going to cost you in terms of repair and maintenance,” Furtas says.

Spoilage costs are also key. According to the Alberta Agriculture report, grain bagging systems will typically have some grain spoilage while fixed storage bins usually provide relatively unspoiled product.

“Once there is a hole in the bag, spoilage can occur very quickly,” the report states. “Damage and punctures can occur to the bags from wildlife, trees and human activity (snowmobiles).”

When the costs are added up, Alberta Agriculture estimates that corrugated bins are the most economical solution for grain storage, with the smoothwall hopper on concrete option slightly more expensive primarily due to higher initial investment and interest costs.

“Despite the extra cost smooth walled bins are dual purpose and can be used for fertilizer and seed, giving greater flexibility,” states the Alberta Agriculture report.

The table shows the grain bagging system as the most expensive option. That’s due to the sizeable investment for the bagger and extractor equipment and as well as high spoilage and depreciation costs and low salvage value.

Plastic grain bags account for the high packaging costs associated with this option. A number of recycling programs in Alberta, Saskatchewan and Manitoba with collection sites that will accept used grain bags at no cost to producers. In areas without these facilities, used grain bags often end up burned or buried in farmers’ fields or carted off to landfills.

According to the Alberta Agriculture report, high winter snowfalls can make it difficult to access filled grain bags stored in fields. Furtas points out that if a snow isn’t regularly cleared around grain bags, a quick snowmelt could result in wet and mucky spring conditions, increasing the risk of spoilage.

Both Furtas and the Alberta Agriculture report stress that costs aren’t the only consideration for farmers choosing a storage system. Other considerations include the farm’s future plans, existing systems and labour availability. It also cites longevity as a consideration, stating that grain bins can last 30 to 40 years with proper maintenance and care.

In Furtas’s view, grain bins probably represent a safer option because of risks associated with operating grain bagging machinery. However, grain bags may make the most sense for growers who are planning to grow their operation or require lots of flexibility.

“The grain bag system definitely allows you to go up and down in scale,” Furtas says, “whereas (with storage bins) you risk a bit of underutilization and if you happen to go over you may have to rent a grain bagger on top of that just to cover off the surplus.”

Furtas says space is another consideration. “Every farm is unique it seems like. Some people have a nice bin yard or lots of room to expand and other farmers don’t necessarily have that.”

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