| CHICAGO, July 23
CHICAGO, July 23 As U.S. farmers turn in record
grain crops this autumn, many will have a powerful new tool -
giant sausage-shaped storage bags - to help them avoid the
lowest prices in years and gain more control over trade with
giants such as Cargill Inc.
Demand has surged this summer for the white polyethylene
bags the length of a football field and the equipment required
to fill them, according to manufacturers and wholesalers.
They allow farmers to store millions of bushels of corn and
soybeans at a fraction the cost of conventional silos and far
more efficiently than leaving grain in the open air.
The bags, which are about 300-foot (91-m) long and 10 feet
in diameter, are common on the Argentine Pampas but until
recently a rare sight in the U.S. Midwest, where the expansion
of big elevators and 50-foot high silos has generally kept pace
with ever-expanding crops.
But with many bins still overflowing with last year's crop
in the world's top grain grower, farmers are snapping up these
systems as a practical necessity ahead of bumper harvests, and
as a safeguard against another winter of railroad delays.
They may also be a sign that farmers will not be rushed into
dumping their harvests quickly. Prices for corn to be harvested
in autumn have tumbled as much as 18 percent so far this year,
leaving growers hoping for a rebound.
"This year, with the Canadian and the U.S. markets both
demanding product, we're running overtime and trying to keep up
with orders," said Jerry Sechler, vice-president of sales at
Loftness Specialized Equipment Inc, a Hector, Minnesota-based
privately-owned firm that introduced bagging machines into the
United States in 2008 after studying operations in Argentina.
The systems also represent the latest front in an ongoing
power struggle in the rural heartland between farmers, who want
more say in how and when their crops are sold, and merchants
such as Archer Daniels Midland and Bunge Ltd, who
control the main arteries of trade.
ADM and Bunge have cited the expansion of on- and off-farm
grain storage capacity for their slumping agribusiness margins
in recent quarters as it is forcing them to pay up for grain to
keep exports flowing and processing plants running.
"Within the last year, that fact has had a negative impact
on overall margins in the grain chain. I think it will take
another good crop for that to reverse," Bunge CEO Soren Schroder
MORE TO STORE
Years of high prices on record production helped by
fencerow-to-fencerow plantings and historic gains in yield have
given farmers healthy profits that they can spend on storage to
see them through rough times, like this year.
On- and off-farm storage capacity jumped 20 percent in the
decade to Dec. 1, 2013, according to the U.S. Department of
Agriculture, with some of the biggest gains of more 30 percent
in North and South Dakota, as farmers switched to corn, which
yields about twice as many bushels per acre than the area's
traditional wheat crop.
Firms such as CTB, a subsidiary of Warren Buffett's
Berkshire Hathaway Inc, make the traditional metal
storage silos that can be seen across the U.S. grain belt.
Now, in the Dakotas and elsewhere in the northern U.S.
Plains, where winter's rail problems had already stranded a
large share of last year's crop, bagging equipment suppliers are
scrambling to keep up with demand.
"There are people that would have never bagged three years
ago that are now almost forced to consider it because the
elevators just can't take any grain with the railroad not
getting their job done," said Craig Fisher, a farmer in
Richardton, North Dakota and owner of Antelope Farm Supplies,
which sells bags and bagging equipment.
His sales of bagging machines have exploded in just the past
week after a patchy start to the season due to adverse weather
which had kept production prospects clouded.
"Everything I've got is spoken for now and I've had to
reorder. We had some come in today and those are already sold."
Fisher is now expecting a 25 percent jump in bagging
equipment sales this year, after a similar jump in 2013, based
on inquiries from customers. He has also sold two semi-truck
loads of the plastic bags this summer and is awaiting a third
96-bag truck in about a week.
LOCK IT AWAY, THROW AWAY THE KEY
Bagging keeps grain in better condition and for longer than
the standard U.S. practice of piling surplus on the ground and
covering it with tarps. The white outside reflects the sun's
heat while the inner layer is black, acting as a barrier to
sunlight and helping maintain a lower than ambient temperature
The cost of storage in a single-use bag is around 5 to 7
cents per bushel, plus charges for loading and unloading
equipment, which together can come to anywhere between $60,000
GrainLogix, the system made by Loftness, can stuff 30,000
bushels an hour -- nearly filling a whole bag of the kind made
by companies like Up North Plastics which can store up to 34,000
bushels of grain.
By comparison, permanent storage costs $1.50 to $2.00 per
bushel to build, or several hundreds of thousands of dollars,
with waiting lists for installation often months long.
With the harvest slated to begin in a matter of weeks, the
white sausages could lead farmers into a post-harvest stand-off
with the grains merchants and push food costs higher.
John Brink, who grows corn on about 1,000 acres (400
hectares) near Centralia, Ill., said he expected to store most
of his crop until prices rise and thought other farmers would do
"We'll lock it away," he said. "We'll slam the door shut and
throw away the key for a while."
(Additional reporting by Thomas Polansek; Editing by Marguerita