The 2005 harvest is a big one. Minnesota farmers enjoyed favorable weather this year. Warm, dry days with little snowfall until late November made harvesting corn easier. Yields are generally very good. This poses challenges for agriculture, even if they’re somewhat enviable ones.
Those who traveled back to rural areas for Thanksgiving probably noted enormous piles of grain on the ground near elevators. A month ago, one even might have seen such piles on the streets of some towns. It illustrates how farmers and grain handlers have to balance investment priorities.
Ability to store grain gives farmers and elevator operators flexibility in when they sell whatever corn, soybeans or wheat they own. Building storage is expensive, however. Farms and grain businesses always can use more facilities of some type. Successfully managing such businesses depends greatly on selecting those possible investments carrying the greatest payoff. One never can do it all.
Moreover, crop yields vary from year to year. Building facilities that could store the largest possible crop is a waste of money. But when a huge crop occurs, people must scramble to handle the surplus. This fall, storing and moving this year’s abundant harvest was further complicated by a slowdown for barges on the Mississippi River after Hurricane Katrina hit Louisiana and its ports.
All involved want others in the chain to have enough capacity to close the gap. Producers whose own bins are full want storage at the elevator in town. Elevators want grain to flow in steadily but not all at once. Moreover, they want to be able to move grain to distant terminals whenever they choose.
Truckers would err, however, by investing enough in rigs to handle peak demand in bumper-crop years and then see these trucks stand unproductively the majority of the time. They understandably would rather keep four trucks rolling 12 months of the year than 24 trucks moving the same amount of grain in two months.
Railroads similarly don’t want to purchase grain hopper cars to meet the immediate demands of every shipper. Their ideal would be a steady flow of grain that ends a week or before the next year’s harvest begins.
No one wants to over-invest in equipment that won’t pay for itself. Everyone thus feels some impulse to blame others for not having adequate capacity. And grain gets piled on the ground.
This is not an economic waste. If harvested over a few weeks but used over a year, some grain will be stored longer. If only a month passes before a bushel of corn is fed or processed, it is wasteful to invest in as expensive a storage facility as for corn kept for a year.
Corn piled on the ground suffers greater spoilage than that stored in permanent facilities. But wasted resources from some spoilage can be less than those wasted by building bins that stand empty most of the time.
Too much grain causes problems. But in the broad context of human existence, it is a highly enviable one.
© 2005 Edward Lotterman
Chanarambie Consulting, Inc.