click image to zoom When grain is dried and moisture removed, the number of bushels in the bin will decline. The amount of shrink calculated by an elevator is slightly more than calculated for on-farm storage, but is a factor in determining the number of bushels eventually sold based on weight of the grain. The shrink for farm-stored grain is about 1.25 percent and for commercially stored grain is about 1.4 percent. For $5 corn, the cost of shrink for removing 5 points of moisture is calculated by: 5 points multiplied by 1.25 percent multiplied by $5.00, which 31.25 cents. That is over and above the drying cost.
Your farm bins will have fans that consume substantial amounts of electricity. However, you have tens of thousands of dollars worth of grain stored in the bin and the small amount spent on electricity is needed to ensure the grain does not decline in value because it came out as sample grade. The aeration is needed to cool the temperature of the grain in the winter and warm it up in the spring so the moisture stays in the same balance as the outside air. Aeration should cost under a penny a bushel and that is not much considering the value of the grain and keeping it condition.
Moving grain into a bin and moving it back out is an additional cost. Augers, conveyors, and elevators are put into bins to move grain. The initial investment is already part of the cost of storage, but the added cost of electricity and labor need to be added to the grain as part of the storage cost. Hofstrand and Wisner calculate that charge at 2-3 cents per bushel.
This is an issue that should not have to be addressed, but it will happen to the best of farmers when the environmental dynamics in the bin are not obvious. Problems may erupt from moisture, hot spots, insects, or even mold in the grain that was not detected. There are many pieces of technology available to monitor the grain quality and all elevators use them. Part of the cost of quality deterioration is shrinkage during the handling process and may not be known until the grain is sold. Such deterioration is part of the commercial grain storage charge at an elevator.
So how do you compute all of these costs and know what your break-even cost of storage may be? After all, if you have made the decision to store and not sell, the cost has to be known to know whether it is covered by the carry in the market.
Fortunately, another Iowa State University economist has developed a decision aid that covers all of the above costs and even more. William Edwards has produced a spread sheet that makes the calculations for you, when all of the known numbers are provided.