As grain yields have risen in the past years, storage tactics have become an interesting topic for farmers. Across the Midwest region, farmers will have to answer the question, what to do with the excess grain? Will they sell it at record low prices or find ways to preserve it? Most farmers have on-farm grain bins to properly store their yield for both the short and long term. After these storage facilities have been filled, the next stop would be the local farmer’s elevator, but with prices down farmers may be reluctant to sell. Minnesota farmers have been dealing with this dilemma by using a process called “grain bagging.”
Grain bagging is exactly what it sounds like, taking large amounts of grain and packing it in 300-foot polyethylene bags. This is a fast and affordable alternative to constructing steel grain bins. Grain bagging gives farmers a short-term place to store their overflow grain during the harvest.
While grain bagging brings many positives to farmer’s gates, it brings its own set of issues. Grain bagging is a short-term storage option, meaning it would provide a place for storage at harvest, but the grain would have to be moved in the months to follow. It is also harder to maintain the harvested grain compared to that in bins. It is easier to control the temperature and humidity inside a grain bin as opposed to the conditions inside the grain sacs. This makes it more of a challenge for farmers to prevent their grain from getting too moist causing mold to grow. With the grain on the ground, it’s harder to prevent insects from infesting the grain. And, the 300-foot long bags demand more of a farmer’s ground for storage, limiting the ground’s uses.
The topic of grain storage shortages is mainly hypothetical; a lot of storage hold-ups come from the farmers themselves. Farmers after harvest have the ability to hold their grain waiting for the price of the grain to rise, as prices rise more farmers sell placing more grain in the market. This in turn lowers the demand and drops the price back down again.
“High prices take care of high prices, low prices take care of low prices,” said Dylan Hawkins, a research assistant at Monsanto. “When prices are high all farmers push to sell their grain causing the price to fall. When the prices fall farmers hold their grain making prices rise.”
This can only be done to a certain extent; a grain producer cannot hold onto their harvest for too long.
“Generally a farmer will hold grain for less than a year or else they start running into quality issues,” said Marc Rosenbaum, the son of a fifth-generation farmer and MU agricultural economics graduate. “Most grain that is stored isn’t meant to be held for more than a season.”
There are a few major positives to farmers holding grain. It prevents the markets from becoming flooded with grain causing a shortage later in the year.
“Holding grain provides a critical market function level,” Rosenbaum said.
Through one of the most basic principles of economics, supply and demand, grain producers manage their storage and profits of grain by competing against each other. With this system in place, grain producers are kept from running up their products prices while at the same time grain consumers are kept from acquiring the grain at an unfairly low price.