Crop bounty drives elevator building boom

Listen to this article

By Roxana Hegeman
AP Writer

Larned, Kan. — A construction boom is under way at grain elevators across the Great Plains, where new varieties of corn are allowing farmers to grow more crops off the same acres and demand from ethanol plants is keeping more crops in state.

In more recent years, a number of forces have coalesced to ignite a building boom of new storage facilities — particularly in states such as Kansas and Nebraska that are awash with more grain crops than places to put them. But demand for more storage space is up across much of the nation’s grain producing areas despite historically high storage capacity in the nation’s federally licensed grain elevators.

The boom is driven in part by the advent of drought-resistant corn varieties that gave growers in arid climates such as western Kansas the option to switch to more profitable corn crops that yield far more bushels per acre than the traditional wheat crops they are replacing. Another factor driving the booming construction is the rise of an ethanol industry that has kept more corn and sorghum within the state, rather than shipping them out immediately after harvest. And commodity markets have given farmers more incentive to hold crops in storage during the harvest glut to wait for better prices later in the season.

All this comes at a time of low interest rates and high commodity prices that have allowed elevators to raise grain storage prices and ultimately build new capacity at existing facilities to handle the huge mounds of grain now being dumped on the ground during each fall harvest.

For communities, the boom is bringing in temporary construction jobs during the weeks it takes to build the storage, but the most immediate economic effect for rural towns will be in the added property valuation on the tax rolls that help pay for schools and municipal services. Since most of this storage is going up in existing elevators, it is not adding new jobs at them because typically the existing staff can handle it, said Tom Tunnell, executive director of the Kansas Grain and Feed Association, the trade group representing grain elevators.

“But then that (construction) crew and that operation move to the next location within the state,” Tunnell said. “It is an ongoing process. Those guys are working somewhere all the time and mostly in our state. So it is good for the state.”

Capacity at federally licensed grain facilities nationwide reached a historical high in 2010 with more than 4.5 billion bushels of storage space, not counting capacity at state-licensed facilities, Agriculture Department statistics show. The previous high was in 1988. The low point since then was reached a decade later. But storage capacity in recent years has been steadily rising, with 2010 being a particularly busy year for new construction that has yet to be licensed and counted.

Among them are the two 140-foot-tall concrete silos under construction at the elevator in Larned, Kan., owned by Pawnee County Co-op Association. The concrete bins will add some 600,000 bushels in new storage capacity — a welcomed addition given that the elevator now has a million bushels of corn piled on the ground a mile away exposed to the weather.

“The pipeline is full,” said Hugh Mounday, general manager of the Pawnee County Co-op. “There is hardly any export grain going out anymore and that is backlogging a lot of wheat in our area, so therefore it forces us to pile corn and milo outdoors.”