NEVADA, Iowa - Farmers are up to their ears in corn and scrambling for places to store it.
With demand for ethanol soaring, farmers around the country have planted more acres of corn this year than at any time since World War II. The U.S. Department of Agriculture predicts the fall harvest will yield 12 to 13 billion bushels of the grain, enough to fill 183,000 Olympic-sized swimming pools - a far greater quantity than currently available storage capacity.
It's a worrisome situation for farmers, who typically choose among selling their grain right away, paying elevators to store it or storing it in silos on their farms. Stashing it gives farmers more flexibility to play the market to their advantage. Last year, some farmers who sold their grain early came to regret it as rising demand for ethanol pushed the price of corn from $2.25 or so a bushel to well past $3.
But the cloud over the farmers has a silver lining for those in the storage business. Storage facilities have more business than they can handle, and manufacturers of silos and storage equipment are stepping up production.
Grain bins are more than just cylindrical towers that hold grain. Walk-in doors, zinc-coated walls and axial fans and heaters are just some possible add-on features. In recent years, bins have increased up to seven times in size from the old standard of the 100,000-bushel bin to a bin that can hold 700,000 bushels of grain. To keep up with the pace of growers, grain bins now require stirring machines to speed-dry the grain or sweep-away systems to quickly empty the bins. Bins can cost as much as $2 a bushel of capacity, with an expected 30-year life span.
Since 2000, the U.S. Department of Agriculture has awarded farmers across the country $485 million in loans to build on-farm storage. But Roger Fray, executive vice president of the West Central Cooperative in Ralston, Iowa, says storage remains a problem. "There has been an industry-wide need (for storage) since the 2004 crop, and we are trying to catch up," he says.
A recent visit to the Heart of Iowa cooperative here in Nevada (the town pronounces it Nah-VAY-Dah), showed the catch-up in action. Nestled in the heart of corn country where eight-foot-tall corn stalks stretch along highways, the co-op began last month to unload five shiny semitrucks full of steel bin, roof and leg parts to build 700,000 additional bushels of much-needed storage space. The seven-location, 8.9-million-bushel operation serves 800 farmers and supplies 100 percent of the grain needed to fuel Lincolnway Energy, the neighboring ethanol plant.
"With prices for concrete and steel rising, we are doing what we can afford right now … but we have plans of doubling the entire size of the cooperative," says Scott Stabbe, Heart of Iowa grain division manager, while checking his computer every few minutes for flashing corn prices displayed by the Chicago Board of Trade. Story County, where Nevada is located, alone looks to produce 32 million bushels of corn and farmers predict a five-million bushel shortage in storage capacity.
At Scafco Corp., a silo maker in Spokane, Wash., sales manager Dennis Queen says sales are up 20 percent in the past year. Brock Grain Systems in Milford, Ind., a subsidiary of Berkshire Hathaway Co., has added extra weekly shifts and is now running 24 hours a day, says district manager John Tuttle. Demand for grain bins is so high that months-long backlogs have developed. Farmer Sam Spellman of Woodward, Iowa, just witnessed the completion of a binhe ordered last December.
His supplier, Menz Construction Co. in Perry, Iowa, doubled its production last year but stopped taking orders in December. John Copple, district sales manager for the agriculture/industrial division of Chief Industries in Grand Isle, Neb., tripled his work crews this year. "This business is either feast or famine," he says. "In the past we could hardly give a grain bin away and now we have a 25 million bushel backlog."
Howard Shepard, program coordinator at the Iowa Grain Quality Initiative, says bin manufacturers as a whole are running about three years behind the demand. The companies that erect the silos are also in huge demand, and there aren't enough workers to provide the labor needed.
Those farmers and grain elevators without enough storage capacity will have to place their grain in piles on the ground, covering them with tarps for added protection.
In other years, farmers have stored their grain in old schoolhouses, airport hangars or caves.
Posted in Business on Saturday, August 18, 2007 12:00 am Updated: 2:46 pm.
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