Ag Energy - Risk Management, Energy and Grain Issues
Renting On-Farm Grain Storage
By William Edwards
ISU Extension economist
With an abundant harvest under way and low grain prices making immediate sales unattractive, storage space for corn and soybeans will be in high demand this fall.
The USDA Census of Agriculture from 2002 estimates that there is storage capacity for 1.5 billion bushels of grain on Iowa farms, and over 1.0 billion bushels of commercial storage available in the state. By comparison, the latest USDA crop report projected 2.6 billion bushels of corn and soybeans would be harvested this fall in Iowa. Add in carryover bushels from the past and a few acres of other grain crops, and we are looking at a very tight situation.
When grain storage is scarce, older bins and other structures that are not usually in use may be pressed into service. Often this extra space is available on a rental basis. Several questions arise about fair rates and terms.
Commercial storage rates often run from 2 to 3 cents per bushel per month, with a 60-day or 90-day minimum. Those rates may be higher this year. However, elevator storage also includes handling and managing the grain, and bearing the risk of storage losses. When storage is rented on the farm, those services are usually not provided. Thus, farm storage rental will generally be below commercial rates.
The 2005 Iowa Farm Custom Rate Survey (FM 1698) conducted by Iowa State University Extension showed an average rental rate of 2.7 cents per bushel per month for on-farm grain storage, and about 13 cents per bushel for the whole year. The range of rates reported for annual storage was 7 to 25 cents per year. Owners of farm storage usually prefer to rent by the year, since they will seldom have a chance to rent a bin more than once during a crop year.
The wide range in rates reflects a variety of conditions and features. The size of the bins and convenience for unloading and loading are obvious factors. Likewise, the type of aeration available and the availability of supplemental heat can add or subtract several cents per bushel.
Other types of storage structures will generally rent for less than conventional grain bins. Flat storage, such as a machine shed, was not included in the survey. However, based on rental rates for machine storage, a charge of 5 to 7 cents per bushel is probably adequate. Of course, the owner of the grain would have to provide aeration and any other modifications needed to make the building suitable for storing grain, and assume responsibility for storage losses. Corn cribs would probably be worth a similar amount.
Another option is to store corn as high moisture corn in an air-tight silo. A survey taken a few years ago showed an average rental charge of $2.50 per ton of silage for such structures. Assuming that 30 bushels of corn takes the same space as a ton of silage, an equivalent rate for corn would be about 8 cents per bushel.
The actual rental rate is not the only consideration when negotiating a rental agreement for grain storage. For example, who is responsible for checking the condition of the grain and deciding when to aerate it? Generally, the renter would want to do this, but in some cases the owner of the storage might perform this function. Access to the bins is important, also. Who will be responsible for clearing snow, or moving machinery?
The cost of electricity used for aeration is usually paid by the renter. If there is a separate electric meter for the bins, the cost can be observed directly. If not, the kilowatt-hours of electrical use can be estimated by multiplying 80 percent of the horsepower rating of the motor by the hours of use. The cost per kilowatt-hour can be found on the farm utility bill.
The date and manner of payment for the rent should be specified in advance. Some agreement about the date by which grain must be removed is also important. Usually, enough time should be allowed to clean the bin before the next harvest. Finally, any storage structure should be carefully inspected before it is filled, and the responsibility for making any needed repairs or modifications established.
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