This Column Was Originally Published in Prairie Farmer During the Month Indicated and Is

This column was originally published in Prairie Farmer during the month indicated and is reprinted here by permission.

For an archive of all our Prairie Farmer columns click here.

Prairie Farmer – November 2007

Calculate Bin Costs in Bin-buster Years

Garrett Stoerger Department of Agricultural and Consumer Economics University of Illinois at Urbana-Champaign

Early this year, USDA reports confirmed corn acreage to be at its highest level in nearly 75 years. More recently, USDA forecasts estimated corn yields to be just behind the record-setting mark from 2004. Consequently, it is to no one’s surprise that we’re looking at the largest U.S. corn crop produced to date.

This year’s harvest will account for more than 13 billion bushels of corn by the time the last combine pulls out of the field. That’s 2 billion bushels more than the previous record.

Drive through the Corn Belt this fall, and you certainly couldn’t miss the massive piles of grain. Elevators scrambled to handle additional grain. Many had to close their doors early as bins became full. Those who had bunkers in place filled them at a record pace.

While bunkers may be a quick and easy way to store excess grain, most farmers equate on-farm storage with Calculate bin costs in bin-buster years grain bins. Meanwhile, bins have become increasingly expensive over the past few years as rising steel prices have upped material costs.

To help farmers pencil grain storage costs into a cost-per-bushel format, the University of Illinois farmdoc team has developed a spreadsheet to analyze bin purchases. The Grain Storage Purchase Analysis tool is yet another FAST program that is downloadable from www.farmdoc.uiuc.edu/fasttools. You will find the Excel tool and a user guide to help you navigate the program.

Figure the cost Once you have established the estimated project cost, including building materials, labor, site preparation and wiring, you will need to determine how you will finance the project, elect a form of depreciation, calculate overhead expenses, and provide default investor information. Providing this data yields an estimated annualized ownership cost, which amounts to a total year-by-year summary of cash outflow to fund the grain storage investment.

The chart on this page is the best representation of the tool’s functionality. In this example, I constructed a 28,000-bushel bin for $70,000 ($2.50 per bushel). For financing, I assumed a 25% down payment and a 7.5% interest rate over 10 years. Other considerations were a 3% maintenance cost, 1% insurance cost and a time horizon of 20 years.

On-farm vs. in town A second feature that the Grain Storage Purchase Analysis tool is capable of is comparing the costs of bin ownership to that of commercial storage. To get started, a series of default information will be required pertaining to your local elevators’ cost of storage, cost of drying and shrink charges. Additionally, it is important to determine the difference in transportation costs between the two. For instance, taking a load of grain to an on-farm storage facility prior to delivery at an elevator will typically be more costly than delivering directly from the field.

After inputting that information, you’ll be able to perform side-by-side analysis of on-farm storage vs. commercial storage for drying costs, shrink costs, storage costs, transportation costs, and any additional grain quality or quantity measurements. The resulting calculation is the net annual benefit of on-farm storage and a maximum building cost that would result in a net annual benefit of zero.

If you’ve been contemplating adding additional on-farm storage to your operation, head over to the farmdoc Website and download this FAST tool today.

Stoerger is FAST coordinator with University of Illinois Extension.