Farm Product Warehousing and Storage

Industry Snapshot

Nearly 950 farm product warehouses held federal licenses in 2008. Those establishments complied with the Grain Standards and Warehouse Improvement Act of 2000 (Public Law 106-472), which amended and modernized the United States Warehouse Act (USWA) originally passed by Congress and signed into law in 1916. There were approximately 689 grain warehouses, 204 cotton warehouses, and 46 warehouses storing other agricultural products in 2008.

Total on-farm storage capacity in the United States in early 2008 was reported at 11.3 billion bushels, and off-farm storage totaled 8.75 billion bushels. The industry was served by the National Grain and Feed Association (NGFA), which worked to represent grain warehouse interests at the state and federal levels and to conduct research to reduce industry costs and increase efficiency and reliability.

Background and Development

Warehousing has long served as a significant link between producers and consumers. Before elevator mechanization, grain was stored and shipped in sacks or barrels. A chain-bucket system to move grain from bins into elevators was invented in 1785 and improved in 1843, achieving widespread use by the 1860s. Before modern roads and rail transportation, country storekeepers doubled as warehousers who traded commodities and offered credit. Transportation and storage improvements made it profitable to grow grains further from major markets, spurring the development of commodity exchanges.

The warehousing industry refined its basic function from simple storage and handling of bulk materials toward supplying the market with custom products. The baking industry, for example, launches hundreds of new products annually to satisfy demand for variety, quality, safety, convenience, price, and environmental compatibility. As warehousing evolved from high-volume processing to a transitional role in value-added product innovation, new management techniques and specialized skills were needed. Communication skills became more important as grain handlers linked producers and manufacturers.

Today's warehouses have computer-literate elevator personnel; are fluent in crop varieties, fertilizers, finance, marketing, and sales; and offer a wider range of services to high-tech farmers and end-users. Growers deliver a variety of grains as raw materials for developing niche markets. In addition to cash crops such as corn, wheat, and soybeans, farmers produced barley, durum, rice, sunflowers, flax, edible beans, and other specialty crops. Advances in genetics and grain monitoring spurred demand for specialized end products. Crops are manipulated for food quality, protein yield, and mold resistance. Insects are detected by acoustic monitors. Nucleic acid probes discover microbes, pesticides, and antibiotics.

Trends affecting the industry in the early twenty-first century included increased corn storage to support the production of ethanol and cotton storage of bumper crops, much of which was being exported to China. Ethanol use of corn surpassed 3.6 billion bushels in 2008, an increase from 3 billion in 2007 and 2.1 billion in 2006. As late as 2003, ethanol use of corn had totaled less than 1.0 billion bushels and had averaged a little more than 450 million bushels annually during the 1990s. Increased corn use for ethanol has had a mixed effect on the industry. On the positive side, most ethanol plants had minimal storage and relied on existing farm product warehouses. In 2006, plants were beginning to add more of their own storage to cover a higher percentage of their ongoing needs. However, many ethanol plants purchase corn directly from farmers, bypassing the need for temporary storage. In 2005-2006, Bob Zelenka, Executive Director of the Minnesota Grain and Feed Association, reported that nearly a dozen of the 600 country grain elevators and feed mills in the state went out of business and several others were forced to consolidate because of the ethanol industry's growth and direct-from-farm delivery.

The United States and Brazil are the largest producers and users of ethanol in the world, combining to produce nearly 90% of the world's supply. The vast majority of American ethanol is produced from corn, while Brazil utilizes sugar cane for its supply.

Increased international trade also affected the industry. In April 2006, the Western Farm Press reported that U.S. merchants would export more than 16 million bales of cotton, much of it to China. The 2005 cotton crop was projected to exceed the available commercial storage space in Kansas, Oklahoma, New Mexico, and the Texas High Plains, and the USDA authorized an extension of outside cotton storage. The 2005-2006 Texas crop nearly doubled that of the state's 2003-2004 crop.

In grain storage alone in 2005, 89 companies had two or more facilities and total storage capacity of at least 6 million bushels. The top North American multiple facility grain companies and cooperatives in 2005, based on total corporate grain storage capacity, included Archer Daniels Midland Co. (more than 700 million bushels of storage capacity); Cargill Inc. (more than 500 million bushels of storage capacity); Bunge North America Inc. (190 million bushels of storage capacity); CHS Inc. (166 million bushels of storage capacity); Attebury Grain Inc. (160 million bushels of storage capacity); Peavey Grain (132 million bushels of storage capacity); and Riceland Foods Inc. (106 million bushels of storage capacity).