By Will Bauer
Private grain elevators and farmer-owned co-ops across the St. Louis region are spending more than ever before to store corn, soybeans and wheat.
“It's been a real challenge the last year and a half,” said Scott Harre, a grain merchandiser at TopAg, a co-op with 10 locations scattered across southwest Illinois.
The costs have reached record highs, according to a new report from CoBank, an agricultural lender. Growing interest rates, high crop prices and increasing transportation costs are just some of the factors.
The high costs leave grain merchandisers, the people buying and selling grain at elevators and co-ops, wanting to sell as quickly as possible.
“I’ve wanted to ship everything I had in my elevator today — right now — because that’s the best price,” said Spencer Janssen, the manager of Litchfield Farmers Grain, a privately owned elevator about 55 miles northeast of St Louis. “Well, that’s physically impossible.”
The conditions are also a disincentive for end users — like a flour mill, cattle feeder or ethanol plant — to take on grain before they absolutely need it, said Tanner Emhke, an economist with CoBank and the report’s author.
“It's the hot potato, and who's going to get stuck holding it?” Emhke said. “Well, it’ll probably be the co-op because they're obligated to hold it.”
High prices for grain is one thing, Ehmke said, but elevated interest rates make it so those storing grain for longer periods of time are in a tough position.
“You combine these two factors and what we have is the highest borrowing cost for storing grain on record,” Ehmke said.
While these factors shouldn’t trickle down to consumers, they’re likely to start affecting farmers. Co-ops and elevators could begin to lower the amount they’ll pay for grain upfront in order to protect against rising storage costs.
TopAg’s Harre has been in the grain business for more than 30 years. Recently, he said, the market has been messy.
“It's frustrating from the standpoint you're not able to make the margins that you intend and think you should be able to make,” he said. “(It’s) not really any fault of your own from the standpoint of you’re just getting beat by the situation that’s being handed to you.”
Freight rates, which remained stable for decades, rose sharply over the past year. And, he said, the futures market for grain has been “inverted” for the third year now.
Normally, merchandisers could sell grain at a higher price than it was purchased at. With current conditions, futures contracts are selling for less and further penalizing elevators from holding onto grain.
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