Farm Product Warehousing and Storage

SIC 4221

Companies in this industry

Industry report:

This category includes establishments primarily engaged in the warehousing and storage of farm products. Farm product warehouses provide temporary storage for non-perishable agricultural products, such as grain. Establishments primarily engaged in refrigerated warehousing are classified in SIC 4222: Refrigerated Warehousing and Storage.

Industry Snapshot

According to the U.S. Census Bureau, there were approximately 637 establishments operating in the farm product storage facilities industry in 2009. 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. The industry employed 6,686 workers, who shared an annual payroll of $269 million, and 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 farther from major markets, spurring the development of commodity exchanges.

The warehousing industry refined its basic function from simple storage and handling of bulk materials to 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.

Warehouses of the early twenty-first century have computer-literate elevator personnel; have employees who 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 produce 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. More than 3.6 billion bushels of corn were used to produce ethanol in 2008, an increase from 3 billion in 2007 and 2.1 billion in 2006. In 2003 less than 1 billion bushels of corn were used to produce ethanol, compared to an average of slightly more than 450 million bushels annually during the 1990s. According to the Center for Transportation Analysis, the amount of corn used for ethanol production increased seven-fold between 2001 and 2010, reaching almost 5 billion bushels in 2010. Increased corn use for ethanol 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 the second half of the first decade of the 2000s, plants were beginning to add more of their own storage to cover a higher percentage of their ongoing needs. However, many ethanol plants purchased 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 were the largest producers and users of ethanol in the world at the end of the first decade of the 2000s, combining to produce 88 percent of the world's supply in 2010, according to the Renewable Fuels Association. The vast majority of U.S. ethanol was produced from corn, while Brazil used 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.

Nearly 950 farm product warehouses held federal licenses in 2008. 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 was 11.3 billion bushels, and off-farm storage totaled 8.75 billion bushels. In grain storage alone, 89 companies had two or more facilities and total storage capacity of at least 6 million bushels.

Current Conditions

According to a 2011 report by IBISWorld, commodities in this industry significantly expanded between 2006 and 2011. Corn farming revenue increased more than 65 percent, while wheat and other grain farming revenue increased 72 percent. According to IBISWorld, "With increased production, demand for the Farm Products Storage and Warehousing industry has mounted as well." Industry revenue was approximately $865.4 million in 2010 and was expected to continue to grow an average of 3.5 percent annually.

On October 31, 2011, major commodities clearinghouse MF Global shocked the industry when it declared bankruptcy and closed all operations. According to The Economist, the firm had less than $1 billion in equity supporting more than $40 billion in assets, and the closure represented the eighth-largest bankruptcy to that time. Thousands of producers, including grain producers, were affected, and many wondered if they would ever see their money again. At the end of 2011, many questions about the deal remained unanswered.

Industry Leaders

One of the top U.S. multiple facility grain companies and cooperatives in 2011 was Archer-Daniels-Midland Co. of Decatur, Illinois, with 2010 revenues of $80.6 billion, 30,700 employees, and more than 700 million bushels of storage capacity. The diversified agricultural giant Cargill Inc., headquartered in Wayzata, Minnesota, had total revenues of $107.8 billion in 2010 and 131,000 employees, as well as more than 500 million bushels of grain storage capacity. St. Louis, Missouri-based Bunge North America Inc. was another large supplier, with $502 million in 2010 sales and 190 million bushels of storage capacity, as was CHS Inc. in Inver Grove Heights, Minnesota, with $25 billion in total sales and 166 million bushels of storage capacity. Other industry leaders included Attebury Grain Inc., Peavey Grain, and Riceland Foods Inc.

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