As the pandemic rages in countries around the world and with an uncertain time frame for the return to any semblance of normal, extra grain storage could become valuable.
Canadian grain movement was hit with a long list of problems well before the pandemic arrived in North America. Since then, although Canadian National Railway’s performance is still lagging that of Canadian Pacific Railway, liquidity in the grain transportation pipeline has improved. But what might happen in the new crop year?
In this frightening new world, all sorts of transportation and sales disruptions are possible. The ports in some countries could shut down, trading patterns could be altered and demand for specific commodities could change dramatically.
Yes, people still need to eat, but look what’s happened to consumption patterns here in Canada with restaurants reduced to just take-out service.
Most people were shocked to learn that some dairy farms are being forced to dump milk due to a drop in demand. Unlike grain, milk is perishable with limited storage options. With an unexpected reduction in sales, the supply chain quickly overflows. In the short term, you can’t turn off the supply coming from cows and it’s difficult to even give away the surplus.
As a proportion of production, there’s probably more on-farm grain storage in Western Canada than in any country of the world. We’re a long way from salt water, it takes all year to move the crop to export, we grow many different grains and grades and storage provides a mechanism to wait for the possibility of higher prices.
Everyone will be trying to grow a good crop. We aren’t turning off the tap due to a volatile world marketplace. Hopefully, the new crop will see strong demand and a functioning, efficient transportation network.
But if that isn’t the case, some additional grain storage could be a good hedge. Grain bags are widely used, but they are a relatively short-term solution. The longer term solution is more bins.
This thought has probably occurred to lots of producers already. If you’ve watched or participated in any of the recent Ritchie Brothers timed online auction sales, used grain bins are not cheap, at least not the good ones.
Small, flat-bottomed bins, especially those with wooden floors, aren’t worth a lot of money, but decent-sized hopper bottom bins command brisk bidding even though moving them is an additional expense.
As an aside, timed on-line bidding seems to work well. With spring late to arrive and many other forms of commerce at a standstill, the auctions have a captive audience.
Even more evident than grain storage is the desire for more fuel tanks. Few thought they would ever see the prices for gasoline and diesel return to such rock-bottom levels. It’s a logical assumption that at some point fuel prices will increase, perhaps dramatically. The savings available now pay for a large part of the cost for more tanks.
In some cases, tanks are being repurposed from other uses and fuel contamination could be an issue. A leaky tank could be costly.
Grain storage has risks too with the primary one being spoilage. As well, there are cases where grain is stored for long periods of time only to be sold at a lower price than when it went into the bin.
But grain storage could be a valuable commodity this fall and perhaps much longer than that.