Economic Considerations for On-Farm Grain Storage

Transcription

1 Economic Considerations for On-Farm Grain Storage David Reinbott Agriculture Business Specialist P.O. Box 187 Benton, MO (573)

2 Advantages Basis & Price Post Harvest Avoid Dockage on Wet Grain Reduce Harvest Losses Early Harvest Basis & Cash Carry in the Market Reduced bottle necks at Elevator & Farm Potential for Identify Preservation Non-gmo corn & beans feed mill seed prod. Flexibility & more marketing Options Wheat Double crop Soybeans

3 Fixed Costs of Grain Storage DIRTI-5 Depreciation 4.0% 25 Year Life Interest 3.0% 6% Interest or 3% on Ave. Invest. Repairs 2.0% Investment Taxes & Insurance 1.5% Investment Total Fixed 10.5% Annual % Cost Costs

4 Fixed Cost of Grain Storage Grain Bin and Equipment $80,000 Bushels of Storage 50,000 Annual % Cost 10.5% Cost/Bushel of storage $1.60 ($80,000/50,000) Investment Cost per Bushel Cost/Bushel/Year $0.17 ($1.60 * 10.5%) Annual Investment Cost per Bushel

5 Fixed Costs of Shivvers Drying System DIRTI5 Depreciation 8.3% 12 Year Life Interest 3.0% 6% Interest or 3% on Ave. Invest. Repairs 6.0% Investment Taxes & Insurance 2.0% Investment Total Fixed 19.3% Annual % Cost Costs

6 Fixed Cost of Drying System Shivvers, Grain Bin and Equipment $100,000 Bushels Dried 130,000 17,000 Bushel Bin Annual % Cost 19.3% Cost/Bushel of storage $0.77 ($100,000/130,000) Investment Cost per Bushel Cost/Bushel/Year $0.15 ($0.77 * 19.3%) Annual Investment Cost per Bushel

7 Economics of Drying Corn Fuel:.022 gallons of LP for each 1% of moisture removed X price of LP Gas/gallon X points of water removed Cost of extra handling and transportation: 5 cents per bushel.

8 Drying Corn - 25% moisture corn to 15% (10 points) and LP gas at $1.50 per gallon. Fuel:.022 X $1.50 X 10 points = 33 cents/bushel 5 cents Handling and Transportation Total Variable cost = 38 cents/bu

9 Returns to Grain Drying Base Moisture 15%, Corn Price - $4.50, Moisture Discount 1% to 18% & then 1.5% of price, L.P. Gas - $1.50 Grain Moisture Shrink Moisture Discount Cnts/bu Value Wet Corn Returns Wet Corn LP Gas Cnts/bu 18% 4.03% % 5.21% % 6.38% % 8.74% % 11.0% % 13.4% Net to Drying Cnts/bu

10 Returns to Grain Drying Base Moisture 15%, Corn Price - $4.50, Moisture Discount 1% to 18% & then 1.5% of price, L.P. Gas - $3.00 Grain Moisture Shrink Moisture Discount Cnts/bu Value Wet Corn Returns Wet Corn LP Gas Cnts/bu 18% 4.03% % 5.21% % 6.38% % 8.74% % 11.0% % 13.4% Net to Drying Cnts/bu

11 David Reinbott February 28, 2014

12 Return to Storage From Change in Basis SEMO Cash Corn Barge Prices 9/1* March Futures Cents/bushel 12/1 12/15 1/1 1/15 2/1 2/15 3/1 Year Yr Ave Yr Ave Yr Ave Yr Ave

13 Corn Storage Returns from the Change in Basis from 9/1 March Futures

14 Return to Storage From Change in Cash Price SEMO Cash Corn Barge Prices 9/1* Cents/bushel 12/1 12/15 1/1 1/15 2/1 2/15 3/1 Year Yr Ave Yr Ave Yr Ave Yr Ave

15 Corn Storage Returns from the Change in Cash Price 9/ /1 1/1 2/1 3/ Yr Ave 7 Yr Ave 5 Yr Ave 3 Yr Ave

16 Change in March Corn Futures from 9/1 Cents/bushel 12/1 12/15 1/1 1/15 2/1 2/15 3/1 Futures Futures Futures Futures Futures Futures Futures Year Returns Returns Returns Returns Returns Returns Returns Year Yr Ave Yr Ave Yr Ave Yr Ave

17 Change in March Corn Futures from September /1 1/1 2/1 3/ Yr Ave 7 Yr Ave 5 Yr Ave 3 Yr Ave

18 55 Returns to Corn Basis, Cash, Futures, Options: Dec. 1 - March Basis Cash Futures Option Yr Ave 7 Yr Ave 5 Yr Ave 3 Yr Ave

19 Returns to Corn Basis, Cash, Futures, Options: Jan. 1 - April Basis Cash Futures Option Yr Ave 7 Yr Ave 5 Yr Ave 3 Yr Ave

20 David Reinbott February 28, 2014

21 Return to Storage From Change in Basis SEMO Cash Soybeans Barge Prices 10/1* March Futures 12/1 12/15 1/1 1/15 2/1 2/15 3/1 Year Yr Ave Yr Ave Yr Ave Yr Ave

22 Soybean Storage Returns from the Change in Basis from 10/1 March Futures /1 1/1 2/1 3/ Yr Ave 7 Yr Ave 5 Yr Ave 3 Yr Ave

23 Return to Storage From Change in Cash Price SEMO Cash Soybeans Barge Prices 10/1* 12/1 12/15 1/1 1/15 2/1 2/15 3/1 Year Yr Ave Yr Ave Yr Ave Yr Ave

24 Soybean Storage Returns Change in Cash Price 10/ /1 1/1 2/1 3/ Yr Ave 7 Yr Ave 5 Yr Ave 3 Yr Ave

25 Change in March Soybean Futures from 10/1 Cents/bushel 12/1 12/15 1/1 1/15 2/1 2/15 3/1 Futures Futures Futures Futures Futures Futures Futures Year Returns Returns Returns Returns Returns Returns Returns Year Yr Ave Yr Ave Yr Ave Yr Ave

26 Change in March Soybean Futures from October /1 1/1 2/1 3/1 10 Yr Ave 7 Yr Ave 5 Yr Ave 3 Yr Ave

27 Returns to Soybean Basis, Cash, Futures, Options: Dec. 1 - March Basis Cash Futures Option Yr Ave 7 Yr Ave 5 Yr Ave 3 Yr Ave

28 Returns to Soybean Basis, Cash, Futures, Options: Jan. 1 - May 1 il Basis Cash Futures Option Yr Ave 7 Yr Ave 5 Yr Ave 3 Yr Ave

29 David Reinbott February 28, 2014

30 Wheat Storage Returns from the Change in Basis 6/15 March Futures /1 12/1 1/1 2/1 3/1 10 Yr Ave 7 Yr Ave 5 Yr Ave 3 Yr Ave

31 Wheat Storage Returns from change in Cash Price - 6/ /1 12/1 1/1 2/1 3/1 10 Yr Ave 7 Yr Ave 5 Yr Ave 3 Yr Ave

32 Change in March Futures from 6/15 9/1 12/1 1/1 2/1 3/1 10 Yr Ave 7 Yr Ave 5 Yr Ave 3 Yr Ave

33 Questions? David Reinbott (573)