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It’s been a good few years in the bin business

Crops have been getting larger, but the elevator system has gone in the other direction, forcing farmers to add more of their own storage

Prairie farmers can’t seem to get enough on-farm storage, and the trend is likely to continue but with ever-growing bin sizes.

As farms grow, so too do their storage needs, says Lyle Muyres, vice-president, marketing for CORR Grain Systems

Statistics Canada’s 2016 Census of Agriculture confirms operations are getting larger, with producers increasing their farm size through land rentals, crop sharing and leasing land from governments.

Rented acreage was highest in Saskatchewan, rising 15.8 per cent to 17 million acres between 2011 and 2016. The number of farms in that province fell 6.6 per cent, but average farm size grew from 1,668 acres in 2011 to 1,784 acres in 2016.

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While the dual 2,000-bushel flat-bottomed bin was once a mainstay, farmers have since replaced them with larger units to manage their grain better.

“I would say our average sale would be about 40,000-bushel bins right now,” says Muyres. “We do still sell some of the smaller hoppers, but I think the growth is on larger storage.”

Alberta Agriculture and Forestry’s crop market analyst Neil Blue adds the uptick in land rentals is also helping drive demand for temporary grain-bagging systems.

“It’s so handy for farmers who have rented land which they may not have long-term tenure on, to just use the temporary storage for land that is a distance from their home site,” Blue says.

Grain production isn’t only rising thanks to larger operations, but also through better genetics and farming practices.

“Trend line yields are up, we’ve had some pretty good crops, and that’s driving it as well,” says Derek Squair, president of Agri-Trend Marketing.

“We are seeing a steady increase in crop yields, so the same number of acres is producing more grain,” agrees senior market analyst Jonathon Driedger of FarmLink Marketing Solutions. “Farmers simply have more grain they have to deal with. That’s a big part of it.”

Muyres estimates some operations have had as much as a 25 per cent yield increase over the last few years. “That is a lot of extra product that needs to be dealt with when it comes off the field.”

More storage, more flexibility

Also driving storage demand is the flexibility it offers to deliver at different times of the year.

Muyres says farmers will receive a premium if they’re in a position to deliver a lot of product when the market needs it.

“I think these bins really allow that, because often producers put them close to primary highways and roadways where they can get it out any time of the year, and they’re able to meet those premium markets,” Muyres says.

More farmers are also using bins to help them delay their sales until after harvest, when prices are almost always under less pressure. Producers are scoring premiums too by holding their higher grades until the market signals a strong need for them.

Basis levels reached epic proportions during 2013-14’s western Canadian rail traffic bottleneck, an event Driedger pinpoints as triggering storage investment growth.

Farmers who could ride out those really wide basis levels were far better off than those forcing grain into a market that didn’t want it and lacked the ability to move it, he says.

That year represented an amplified version of what farmers often go through: “There are periods when if you can avoid having to push grain off the farm by storing more of it, it gives you more flexibility, and maybe the grower can try to capture some higher prices later on in the year,” says Driedger.

Blue says some of the delivery problems that plagued the 2013-14 log-jam season continue to haunt farmers today.

“Even this year a lot of farmers have complained to me they have contracts that aren’t called for delivery for two or three months after the contract delivery date that was intended,” Blue says. “So it continues to this day that there’s difficulty in farmers delivering in a timely manner.”

Elevator capacity rebounding

The log-jam event even got grain companies into the act of increasing their country elevator storage, reversing a long trend of decline.

In 1986 Prairie primary elevator capacity was 7.7 million tonnes, but it then bottomed to 6.1 million tonnes in 338 elevators. But as of May 1, 2017, it had grown back up to to 343 elevators with over a million tonnes more storage capacity.

“Most of it comes as almost all the major grain companies have been adding storage at their existing elevators over the past three years,” says Mark Hemmes, president of Quorum Corporation, the company which the federal government has hired to monitor the grain handling and transportation system.

“Most of the additional storage is using 300- to 700-tonne steel bins that are linked into the elevator’s main system and leg.”

Hemmes links that growth to the 2013-14 problems that left grain companies with bins so full, they were forced to stop buying.

“The incremental storage gives them greater flexibility when the supply chain gets plugged up,” Hemmes says. “It means that even if they have a loaded train on the siding and the elevator is getting full, they can still buy grain and meet their contracts with producers.”

Bigger funnel, smaller neck

The recent bump in elevator capacity does little to offset farmers’ need for more storage because of higher yields. In 1986 the system could hold about 22 per cent of a year’s delivery. Today it can only handle about 16 per cent, and in fewer elevators — 332 last year compared to 1,846 in 1986.

In other words, a good deal of the efficiency costs in the commercial elevator system were transferred to farmers, including the price of building silos, labour hours associated with storing grain and keeping it in condition, interest costs of holding it, and the higher cost of transporting it greater distances.

“And [elevators] only are able to take so much at the time of harvest, so guys need to have a plan, they’ve got to go somewhere,” says Muyres. “And with more distance, if they can’t get their product there and return to their operation quick enough, you’ll see a lot of guys store it and then move it later.

“It’s just part of their plan to be able to maximize the amount of acres they cover with their existing equipment, and I think grain storage allows them to do that.”

How much is too much?

All things being equal, a farm can’t have too much storage, Driedger says.

“I see no downside to storage… it can really pay for itself in years when for farmers it’s in their best interest to ride out a dip in the market, or ride out periods when basis levels are weak, or movement is challenging. And you need a certain amount of storage to do that.”

Muyres once believed a time would come when steel demand would slow down and that bins wouldn’t get any bigger.

But he says he’s been proven wrong. There’s no indication that interest in bins is waning, and, if anything, more farmers are looking for even larger capacity — in some cases over double the popular 40,000-bushel units.

“We’re setting up quite a few this year of close to 100,000-bushel bins; not for the first time, but for the first time we’ve had a lot of interest in it, so my sense is that’ll continue to grow,” Muyres says.

Where does it stop?

Muures thinks he knows. “Maybe in some cases — and we do some of this as well — there’ll be virtually terminal-sized operations on the farm.”

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