Ability to store grain provides leverage

PHOENIX, Ariz. — American farmers have significantly increased their grain storage capacity, which is allowing them to become patient crop sellers, says U.S. Wheat Associates.

Growers and commercial handlers built more than 117 million tonnes of new storage from 2004-14 for an 18 percent increase in total capacity.

That is equal to about two full years of U.S. wheat production.

It includes 57 million tonnes of new on-farm capacity and 60 million tonnes of off-farm capacity.

“It strengthens producers’ hands if they’re able to hold wheat in storage,” USW president Alan Tracy said in an interview at the 2015 Commodity Classic. “When prices are low, we don’t sell.”

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Farmers are storing more grain largely because they have produced 42 percent more of the top five grains and oilseeds over the last decade.

It helps that five or six years of strong crop prices mean growers have the financial wherewithal to be patient with their sales programs.

Another factor behind the grain storage trend is that farmers are growing more corn and soybeans. U.S. corn plantings have expanded 19 percent over the past 10 years and soybeans are up six percent. Their gains have come at the expense of wheat and other small grains.

An acre of corn requires 3.3 times the storage space of an acre of wheat, while the storage requirements for an acre of soybeans is about the same as wheat.

However, soybeans are worth a lot more and farmers are more in-clined to store that crop in hopes of a price rally.

“Your money doesn’t make much at the bank these days. Why not hold onto (soybeans) and wait for a better price?” said Tracy.

Expanded grain storage gives U.S. growers a competitive advantage over exporters in a place like Russia, where farmers don’t have the storage or the financial capacity to hold onto their grain.

“They tend to get rid of it every year, more or less, regardless what the price is,” he said. “In many cases, they sell at prices that no U.S. or Canadian farmer would be willing to sell at.”

Russian farmers are forced to sell into lower value markets such as Egypt.

“We’ve been kind of moving out of that area and concentrating more in Asia and Latin America, just as Canada has,” said Tracy.

Wheat storage in the U.S. varies by region. Growers in the hard red winter wheat growing areas typically use off-farm storage while spring wheat and durum growers in the northern states are more likely to have on-farm capacity.

“There are farmers who quite regularly hold onto more than a year’s (durum) crop,” he said.

“Their ability to hold and wait has paid off far more often than not.”

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