Growing profit with cost effective grain storage
Author: Sarah Jeffrey | Date: 05 Nov 2014
‘To store or not to store’ is a question currently weighing on the minds of grain growers across Queensland and New South Wales as they look to maximise profitability from this year’s winter crop harvest.
While the lure of potentially higher grain prices may be attractive, growers are being encouraged to undertake a cost-benefit analysis of on-farm storage versus bulk handler storage before making a final decision.
Consultant Chris Warrick who heads up the Grains Research and Development Corporation’s (GRDC) Grain Storage Extension Project which conducts around 100 grower workshops across Australia each year, said the viability of grain storage was different for each grower.
“Depending on the business’ operating style, location, resources and the most limiting factor which is the ability to increase profit, on-farm grain storage may or may not be the next best investment,” he said.
To make a sound financial decision, Mr Warrick said growers needed to compare the expected returns from grain storage versus expected returns from other farm business investments such as more land, a chaser bin, a wider boomspray, another truck or paying off debt.
“Many growers will be looking to ascertain whether they can store grain on-farm cheaper than paying a bulk handler to store it or whether their grain should be sold straight to market,” he said.
“Calculating the costs and benefits of on-farm storage will enable a return on investment figure which can be compared with other investment choices and a total cost of storage to compare the bulk handlers.”
The key to a useful cost-benefit analysis is identifying which financial benefits to plan for and costing an appropriate storage to suit that plan, according to Mr Warrick.
“People often ask, ‘what’s the cheapest form of storage?’. The answer is the storage that suits the planned benefits,” he said.
“Short-term storage for harvest logistics or freight advantages can be suited to grain bags or bunkers. If flexibility is required for longer term storage, gas-tight, sealable silos with aeration cooling allow quality control and insect control.
“The other factor for northern growers to consider is if on-farm silos can be used twice a year to store say a summer and winter crop, fixed costs are effectively halved. That is, there’s a greater volume throughput for the same infrastructure, opportunity and depreciation costs.”
He said while it was difficult to put an exact dollar value on each of the potential benefits and costs, a calculated estimate would determine if an investment in on-farm grain storage was worth more thorough investigation.
“If we compare the investment of on-farm grain storage to other investments and the result is similar, then we can revisit the numbers and work on increasing their accuracy.
“If the return is not even in the ball park, we’ve potentially avoided a costly mistake. On the contrary, if after checking our numbers the return is favourable, we can proceed with the investment confidently.”
More information on the economics of on-farm storage and all aspects of grain storage is available via the GRDC Stored Grain Information Hub at www.storedgrain.com.au. General telephone enquiries can be directed to 1800-WEEVIL.
A GRDC Economics of On-farm Grain Storage guide, which includes a cost-benefit analysis template, is available via www.storedgrain.com.au/category/information-hub/economics-of-grain-storage/.
Caption: Growers are being encouraged undertake a cost-benefit analysis of on-farm storage versus bulk handler storage before making a final decision.
Chris Warrick, GRDC Grain Storage Extension Project
0427 247 476
Sarah Jeffrey, Senior Consultant Cox Inall Communications
0418 152 859
GRDC Project Code PAD00001