Storage Costs Impact Marketing Alternatives

By George Flaskerud, NDSU
Extension Crops Economist

Storing wheat on the farm from harvest until November could cost about 15 cents per bushel in properly designed storage facilities. To cover storage costs, a producer would have to receive an additional 15 cents per bushel in November, compared to the selling price for delivery off the combine in August. A farmer would need an additional 11 cents for barley and 10 cents for oats.

Storing sunflowers on the farm from harvest in October until May could cost about 59 cents per hundredweight. The cost could be about 18 cents per bushel for corn. Storage from harvest in September to May could cost about 39 cents per bushel for soybeans, and 78 cents per hundredweight for canola.

Notice that these costs begin at harvest. They are relevant to storage decisions made before the grain is actually put in the bin because they include in/out charges. These in/out charges are important to the storage decision only before the grain is in the bin. Once the grain is in the bin, the in/out cost is not important to the storage decision since part of it has already been incurred and the remainder will be incurred regardless of whether the grain is hauled out immediately or later.

Total in/out costs were estimated to be approximately 8 cents per bushel for wheat, 8 cents for corn, 7 cents for barley, 7 cents for oats, 11 cents for soybeans, 21 cents per hundredweight for sunflowers and 22 cents per hundredweight for canola. This “first” category of costs included the costs of operating and repairing the equipment, handling shrink, insurance, management, labor and trucking. The 7- to 22-cent charge would be considered as a cost during the first month of storage only.

How much storage costs change from one month to the next depends partly on crop prices. For this analysis, the costs were based on potential average prices during storage of $2.75 per bushel for wheat, $1.59 for corn, $1.40 for barley, $1.10 for oats, $4.29 for soybeans, $6.90 per hundredweight for sunflowers and $8.80 per hundredweight for canola.

How much storage costs change from one month to the next also depends on interest rates. A “second” category of costs included a cost per month for interest on investment in the grain in storage and storage shrink. The cost for shrink is very small for properly designed storage facilities.

Interest on investment was based on a bank loan annual interest rate of 9 %. An alternative rate of interest would be applicable for those producers with no debt. It would be the potential rate of return from an investment of the proceeds of a grain sale. The rate of return on a six-month certificate of deposit was about 4.1 % in July.

Combined costs from both the first and second categories of costs are important to the sell or store decision made prior to harvest. When combined, they become cumulative variable monthly on-farm storage costs. They are the costs specified at the beginning of this article.

Cummulative variable storage costs per month on the farm relevant to storage decisions prior to harvest (these include in/out charges) Months in storage Wheat ($/bu) Corn ($/bu) Barley ($/bu) Oats ($/bu) Soybean ($/bu) Snfl ($/cwt) Canola ($/cwt) 1 0.1021 0.0952 0.0839 0.0799 0.1444 0.2632 0.2888 2 0.1241 0.1087 0.0951 0.0887 0.1787 0.3184 0.3592 3 0.1461 0.1222 0.1063 0.0975 0.2130 0.3736 0.4296 4 0.1681 0.1358 0.1175 0.1063 0.2473 0.4288 0.5000 5 0.1901 0.1493 0.1287 0.1151 0.2816 0.4840 0.5704 6 0.2121 0.1628 0.1399 0.1239 0.3160 0.5392 006408 7 0.2341 0.1763 0.1511 0.1327 0.3503 0.5944 0.7112 8 0.2561 0.1898 0.1623 0.1415 0.3846 0.6496 0.7816 9 0.2781 0.2033 0.1735 0.1503 0.4189 0.7048 0.8520 10 0.3001 0.2168 0.1847 0.1591 0.4532 0.7600 0.9224 11 0.3221 0.2304 0.1959 0.1679 0.4876 0.8152 0.9928 12 0.3441 0.2439 0.2071 0.1767 0.5219 0.8704 1.0632

Storage Costs Once the Grain is in the Bin
Now let’s examine what the storage costs could be once the grain is in the bin. These storage costs are different because the in/out charges can be ignored.

Cumulative variable monthly on-farm storage costs that are relevant to storage decisions made after the grain is in the bin include only the total cost from the second category. Recall that the second category included a cost per month for interest on investment on the grain in storage and for storage shrink.

Suppose that a decision is being made in November whether to sell wheat for immediate delivery or to store until April. An additional five months of storage is being considered. The relevant total storage charge to consider in this decision would be about 11 cents per bushel.

Sell or store decisions have been covered for the situation at harvest and for a situation later in the year. There is a third scenario – when grain is stored to speed-up harvest.

If storage is essential to harvesting efficiency, some producers may choose to include category one costs and several months of category two costs as “harvesting” costs instead of storage costs.

Suppose that a producer stores wheat to improve harvesting efficiency and that field work prevents him from delivering wheat to the elevator until November. If a decision is being made in November to either sell wheat for immediate delivery or to store until January, an additional two months of storage is being considered. The relevant total storage charge to consider in this decision would be approximately 4 cents per bushel.

On-farm storage costs were discussed here for existing facilities only. If a new bin is being considered, refer to NCR Extension Publication No. 217, Fact Sheet #19, “Cost of Grain Storage,” for guidance in determining storage costs. The fact sheet is available from NDSU county extension agents. Also, if the grain is stored in the elevator, the cost of storage per month is the rate specified by the elevator plus an interest cost. The monthly interest cost is the cash grain price times the interest rate.