Low water levels along the Mississippi River are causing transportation disruptions for agriculture, as the river saw record low levels earlier this month. The lower levels mean less product can flow along the river. American Farm Bureau Federation Economist Danny Munch explains how farmers can buffer against transportation disruptions like this one.
Munch says, “One of the big options is looking at grain storage. When farmers have a sufficient storage capacity close to where they’re growing, it means they can have a place to offload harvest if downstream transportation options are too expensive or unavailable, as they’re in many places right now. On-farm storage allows them to have almost full control over when they want to market those goods. So, they can really track transportation prices and other market factors before making the ultimate decision to sell or ship their product.”
USDA data shows the United States has 25.4 billion bushels of grain storage capacity.
“When you look at total current stocks as well as expected harvest, that number is 23.12 billion bushels,” according to Munch. “So, comparing those two numbers we have about a 2.2 billion bushel surplus of grain storage, which means we have a little bit of wiggle room, which is good during these low river conditions. It’s not uniform across all states, though, so depending on the state you’re in, some product is going to have to find another way to move.”
The decision to store grain for longer periods of time does require some financial considerations. Munch says, “High interest rates increase the cost of storage and elevators, which means farmers might receive lower bids for their crops. Farmers also have large sums of money tied up in grain inventory based on the capital that they borrowed for the season’s expenses, and that can be paid back when they sell their product. So, if they choose to store the product, those farmers are on the hook for more interest payments, and continue to have all that capital tied up, but obviously weighing the costs and benefits is really important for each individual farmer.”
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