Cash flow option if storing grain
October 12, 2018
Due to low commodity prices, many of you are planning on storing grain until prices get to a profitable level. Some elevators and grain facilities are telling producers no grain will be taken unless it was contracted with them. Storing grain, however, creates problems with cash flow and covering debt load. A few of my producers stored grain and took advantage of Marketing Assistance Loans (MALs) last year. I had not seen the use of MALs in frequent years, but it is a great way to use the grain that is in storage to help with cash flow issues.
How do MALs work? MAL is a marketing tool that is available to producers at the beginning of harvest, which can provide interim financing to meet cash flow without selling the commodity during harvest time lows. Loans are mature on the last day of the ninth calendar month in which the MLA was approved. The commodities must meet specific CCC minimum grade and quality standards. National loan rates are as follows: Wheat-$2.94; Oats-$1.39; Barley-$1.95; Corn-$1.95; Soybeans-$4.84; Grain Sorghum-$1.95. Oilseed crops, dry beans, and lentils are also eligible. These loan rates can be less so check with your county FSA office.
As we all know, long term storage of grain comes with risks of moisture and insect problems. Extension has four great articles discussing grain storage on the farm–"Grain Storage: What are my Options;" "Grain Storage: It Starts with Harvest;" "Grain Storage: Climate Inside the Bin;" "Grain Storage: Do's and Don'ts." All articles can be found by going to igrow.org and searching for the title. The articles address air movement in stored grains, some storage options, and safety around stored grains. Another article to check is "How to Prevent Pests in Stored Grain."
If you plan on taking advantage of this program, grain in the bins on the farm will need to be measured and will not be able to be used for feed. Grain stored in a commercial facility will need to be placed under a warehouse receipt. Remember, this is not a marketing strategy for cash grain, just access to cheaper interest rates for up to nine months, so make sure you are still using marketing strategies for future sales.
If any producer would like more information on how the SD Center of Farm and Ranch Management can help your operation, call 1-800-684-1969, email firstname.lastname@example.org or check out our website at http://www.sdcfrm.com.