Case for central storage facilities getting stronger

8 June 2001

Case for central storage facilities getting stronger

Storing hard-won grain

successfully demands an

increasingly professional

approach. This special focus

examines what is required,

starting with a look at costs.

Edited by Andrew Blake

WITH grain prices still relatively low, it is becoming increasingly hard to justify new on-farm storage, says a leading equipment installer.

"Its becoming more difficult to defend spending on small to medium stores if the money is coming purely from the farming enterprise," says Peter Webb, director and of Wilts-based TH White.

Economy of scale is the key factor. "The capital cost of a 1200t basic bulk store building with a drying floor is about £115/t."

But an "all-singing, all-dancing" store with full automation, weighbridge and laboratory, such as the recently completed 31,000t Alex-andra Silo project at Kings Lynn docks, costs no more per tonne.

Many of the firms new on-farm installations are the result of estates taking tenanted land back in-hand, and money from outside the farming business is nearly always involved, he says. "Usually they are looking to centralise and update their stores to improve the overall value of the property.

"We are installing central style facilities on an estate producing 14,000t/year in Lincs, but the overall cost will be about £165/t. Elsewhere, for a 3500t store, it is virtually £200/t."

Such figures highlight the popularity of the co-operative approach for working farms, says Hants Grain manager Mike Clay. "Its important to compare like-for-like." Current capital cost for a 1000t of the co-ops facility is about £90/t, only one-third of which needs paying up front.

"The only added cost of central storage is the haulage from the farm," says Mr Clay. Running costs are much the same as for on-farm facilities. "The arguments for central storage, which offer significant economic and management benefits, are getting stronger."

Unlike farm stores which eventually deteriorate, investment in a co-op effectively maintains its asset value. "Growers who bought in with us in 1978 at £40/t could probably sell their space now for £90/t."

Other scale advantages denied most on-farm storers include access to wider markets through blending and the ability to fill last-minute bulk orders, he adds.

In most cases it is reasonable to write-off a storage investment over 20 years, says Mr Webb. But in the long term a centralised store is likely to have the edge because, unlike most farms, they usually have a built-in maintenance budget.

On-farm stores with reasonable facilities can be modified and expanded to cope with changing demands, but it is hard to achieve the flexibility of centralised stores, says Mr Clay. "You can spend £30-£40/t upgrading and still not get it right. On-farm stores dictate what you can grow. A centralised store allows you to grow anything."

Grain storage comparison

Off-combine On-farm Centralised sale storage co-op storage

Capital cost/t Nil £130-150 £90

Ability to segregate No Limited Yes

Blending benefits No Partial Yes

Pool marketing scope No Partial Yes

Resale flexibility N/A No Yes

Permanent labour cut Possible No Probable

Rejection risk Yes Yes No

Claims/allowances risk Yes Yes Favourable

Source: Hants Grain.

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