September 17, 2007

More Grain Bins Needed

Another offshoot of growing more corn for ethanol:  you have to have some place to keep it all while you're waiting to sell it.

Ethanol manufacturers are snatching up corn, a key ingredient in the alternative fuel. That has caused corn prices to soar and encouraged farmers to grow more grain, Niemeyer said. Grain elevators, which buy and store crops, and farmers themselves are investing in additional storage space as a result.

Wells County farmer Bobby Caley planted more corn to capitalize on the rising prices. He and his sons built a 60,000-bushel storage bin for his farm this summer. Caley sells grain to several local elevators and stores the rest at his farm, which has room for more than 200,000 bushels.

Storing some grain on the farm gives farmers additional selling opportunities, Caley said. Farmers who want to sell to ethanol plants must store it until the delivery date the plant sets.

Even if farmers don't sell to an ethanol plant, they can earn a premium for waiting to sell grain, Caley said. Most buyers pay a higher price after harvest, when less grain is on the market.

"Because of the glut at harvest, there's always a (price) basis improvement" for farmers who wait a few months to sell their grain, Caley said.

Dave Troxell out of Bluffton's Troxell Equipment Co. has a backlog of grain bin orders and expects bin orders to remain strong for years due to the ethanol plants in the area.  Troxell says, "Anything that's good for the farmers is good for us."

Troxel Equipment's sales last year increased about 15 percent from 2005, Troxel said. He expects a similar level of growth this year.

Industry experts are predicting ethanol plants' demand for corn will preserve these market conditions for three to five years, Ritchie said. With a biodiesel plant nearly completed in Claypool and an ethanol plant under construction in Bluffton, he expects demand for grain storage to remain strong.

The competition for farmers' crops will likely keep grain prices high. That trend should continue to benefit grain storage companies, Troxel said.

"Anything that's good for the farmers is good for us," he said.

Well, everyone wants our local farmers to come out on top, but I still wonder how high grain prices will affect feed and food prices.  Be on the watch for the price of meat and the price of bread to rise.

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