Farmers advised about pros-n-cons of on-farm grain storage

By MANDY JOHN | Central Texas Edition

October 31, 2002 -- Crop farmers were able to find out information on how to properly care for their crops during the Williamson County Crops Clinic, held in Taylor on Oct. 22. At the clinic, Dr. Mark Waller presented information on marketing of on-farm stored grain and Dr. Chris Sansone discussed insect control in stored grain.

"What I am here to talk about today is the economics of on-farm stored grain," explained, Waller, professor and Extension economist in grain marketing and policy for Texas A&M University. "I will tell you the in's and out's of this procedure.

"When I was young, the majority of stored grain was 80 percent on-farm and 20 percent commercial. Now, it's just the opposite."

Waller stated that in a normal crop year, a farmer must think about the demands for the whole year. He said that the crop will usually get better as the year goes on in that normal crop year.

"You might have a problem in the middle of the harvest year, because by this time you just want to get the harvest over with and store the grain. One thing I will say about storing grain every year is no, no, and heck no.

"Fixed costs are sunk costs. Don't worry about the cost of the grain bin because during the year the cost of grain might go in a different direction. If you are going to have storage, you must think carefully about your decisions for the future."

He said that the market already precedes what will happen in the future. If the grain market is smaller, the prices will be higher and when the market is bigger, the prices will be lower.

"Look at the prices in Central Texas, for example. These last few years have been in the lower area when it comes to the grain market.

"You want to try and be careful about hedging when it comes to the future storage of grain. If I don't get any other point across, the one thing I want you to understand is putting up stored grains does not mean storing grain every year."

Waller said that if a grain farmer wants to also be a merchandiser, there are things they must consider such as thinking about the quality of the grain and finding a location to sell the grain.

"You must be aware of what it will cost you to be a merchandiser."

Waller ended by giving several ways to price stored grain:

• Store it unpriced (based on just speculation)

• Store it and forward a contract on the grain

"You don't want to have a payment promised just based on a handshake. Make up a contract to ensure you will get paid for your services."

• Store it and sell futures

• Store it and buy futures

• Store it and buy a put option

• Store it, buy a put option, and sell a call above that put option

• Sell the cash and buy a call option

"Stored-grain insects are a tough situation," stated Sansone, Extension entomology specialist with Texas A&M University. "Even with all the new technology that is out there, it is a very difficult approach."

He said that everything has to be taken into consideration when deciding to store grain.

"One thing that must be done is sanitizing your storage area. Any grain left over from the previous year can cause an insect infestation."

Sansone also explained that when a farmer is storing grain, they must take into consideration who built the storage area.

"Lots of insects can fit into small amounts of space. That is why it's important to have the storage area as air tight as possible.

"When we talk about stored-grain insects, we can break them down into two categories, primary pests and secondary pests. If you can keep primary pests off your grain, it will be less likely to have secondary pests bother you."

Primary pests are the pests that develop inside the grain kernel. Sansone said that the three primary pests in Texas are the rice weevil, lesser grain borer, and angoumois grain moth.

Secondary pests are the pests that feed primarily on the outside of the kernel. He explained that individual identification of these pests are not important. The most common secondary pests are the rusty grain beetle, red flour beetle, Indian meal moth, hairy fungus beetle, and psocids.

"Eventually, you will have to fumigate your storage area. I have not known a grain storage area that has not had to have been fumigated. My advice to you is to let the professionals handle fumigating your area."