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Drying, storing costs rise

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[October 10, 2008]  URBANA -- Corn producers face a double whammy this harvest season, said a University of Illinois Extension farm financial management specialist.

"Commercial drying and storage charges for grain will be higher in 2008 than in recent years," said Gary Schnitkey. "Moreover, corn will likely be harvested at higher moisture levels, further increasing drying costs this season."

Schnitkey's full report, "Drying and Storage Costs in 2008: Comparing Alternatives with the Grain Delivery Model," is available on U of I Extension's farmdoc site.

For corn, Schnitkey believes commercial drying costs could approach 50 cents per bushel for corn harvested at 25 percent moisture. Drying costs for 20 percent moisture corn will range from 15 to 25 cents per bushel. Commercial costs for storing corn for January sale can range from 15 to 30 cents per bushel.

"As usual, each elevator uses different factors, storage moisture levels, drying charges and storage charges, thereby causing net revenues farmers receive for grain to vary across elevators," he said. "Given higher costs, differences across elevators could widen this year relative to previous years."

To help producers, a FAST Microsoft Excel spreadsheet called Grain Delivery Model has been developed.

"It compares net revenues across delivery points," he explained. "This program is demonstrated for three elevators typical of charges in central Illinois. Also, storage economics given higher costs are discussed."

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For producers, Schnitkey said it is important to note that increased costs for storage in 2008 mean that it will take higher commodity prices to warrant storage.

"While it is possible that grain may increase by these amounts, current futures prices and forward bids do not indicate price increases of the magnitude needed to cover storage costs," he said. "This presents a dilemma. Current prices are low in the $3.70 range for corn. Price may increase after some settling of concerns about the economy. At this point, it is too early to say.

"Storing grain while speculating on price increases has become more costly this year."

[Text from file received from University of Illinois Extension]


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