Quality infrastructure necessary to keep farmers competitive

As farmers continue their fall harvest when it comes to storing and marketing those topics are not afterthoughts and they share a connection with roads and barges.

During HPJ Live, Aug. 6 to 8, in Wichita, Kansas, panelists spoke about the relationship of marketing and storage decisions in an ever-changing environment that includes transportation efficiency.

Scott Sartor, founder and CEO of Croptell, Hernando, Mississippi, said operational efficiencies, such as saving the wear and tear on grain trucks, are an immediate benefit for farmers with on-the-farm storage. On-farm storage can ensure quality, particularly if the grain is being marketed to a targeted outlet.

Producers should have the mindset their storage decisions are tied to profits, he said.

The key to profitability is tied to the capability to market when it is to the producer’s advantage and that is rarely during harvest. He shared information about how an investment in on-farm storage can pay off.

Know and understand your numbers

However, it has to work in concert with an overall plan, Sartor said. Higher interest rates combined with inflation on construction materials can be a significant barrier. A farmer may be able to obtain a government loan that can lower interest costs, but Sartor said the farmer needs to carefully review details with agency officials.

With good management, the on-farm storage can be a profit center and taking out a loan to construct one can be advantageous, he said. Plus with added capacity it can give the farmer confidence in his marketing strategy. The farmer also must be realistic and weigh that in a cost-benefit scenario.

“We are in a bear market,” he said when looking at the major commodity prices.

Guy Allen, a senior economist at Kansas State University, believes in developing a marketing strategy early because there are times when the market is saying, “I want the grain now and not later.”

The cost for storing grain is about 8 cents a bushel per month, but varies depending on if the grain is commercially stored or is on a farm, he said.

The U.S. residually stores grain for the world, he said. Brazil and Argentina are two notable global competitors, but because their storage and transportation systems are not as developed as the U.S., Allen said, farmers in those countries often sell much sooner than their North American counterparts. U.S. producers benefit from a sophisticated marketing and trading system, too.

Roads and barges

One benefit High Plains producers have is grain heads east to be loaded on barges on the Mississippi River, and that’s why quality highways and railways are necessary, Allen said.

Mike Steenhoek, executive director of the Soy Transportation Coalition, Ankeny, Iowa, said transportation affects a producer’s bottom line. “The reason the U.S. farmer is competitive (versus other countries) is not because of the cost of production, but because we have a lower cost of transportation.”

The U.S. is also fortunate in that it has the Mississippi River in the middle of the country and take crops to the gulf at competitive rates and transports fertilizer to outlets to the north. Steenhoek said farmers are in a commodity business and must have transportation efficiency to be profitable.

He regularly visits with state and federal lawmakers to tell them that rural roads must be maintained and improved and, as an example, highways need to accommodate trucks with bigger axles to carry more grain. Locks and dams on the Mississippi River must be kept up to date, and freight rates have to be fair to all parties.

Steenhoek said the country has benefitted from the Inflation Reduction Act of 2021, and he said Congress in 2026 will need to look at a major highway bill. While the cost of building roads and bridges carries a large price tag that deserves scrutiny, he said, the country benefits from improvements when they are completed without delays.

State of the economy

All three panelists said crop farmers are in a tough position, and they must look for ways to be efficient.

Sartor’s advice to farmers is to start by strengthening their balance sheet and focusing on what they can control. The goal should be to mitigate risk and “grow your equity” even in a tough economic climate.

The moderator was Ken Eriksen, a managing member and strategic adviser with Polaris Analytics and Consulting. He is a regular contributor to High Plains Journal

Dave Bergmeier can be reached at 620-227-1822 or [email protected].