World wheat supplies are at record highs this year, and projected to grow even higher -- and the surplus of wheat has led to a worldwide wheat storage shortage. The world currently has so much wheat that some analysts say the United States would have plenty of wheat even if not a single American farmer were to plant wheat this year. In fact, American growers are starting to sow less wheat, as Australian and Russian farmers have increased their wheat production so dramatically that Asian countries are finding it more economical to import their wheat from Australia and Russia than from the United States. The United States is still the world's largest exporter of wheat, but its share of the world wheat market has dropped to 19 percent this year, down from 29 percent in 2008, because so much wheat is already available elsewhere.
The worldwide wheat surplus has raised several issues that relate to the storage industry. Wheat can safely be stored for months or years, depending on the condition of the wheat and the conditions of the storage facility. Even after wheat has been stored so long that it is not considered acceptable for human consumption, it can still be sold as animal feed. Wheat passes through several sets of hands on its way to market. It is initially stored by farmers, then by grain buyers, transporters, and silo operators. Though wheat can be stored for quite a long time, storage operators must carefully consider condition in the storage facility, such as the temperature and humidity levels. If wheat comes in wet from a rainy harvest, it may have to be dried in storage. Storage operators can dry wheat by keeping it at a higher than usual temperature and by keeping fans running continuously. If wheat is not dried, it can become moldy or may be contaminated by insects, such as weevils.
"You can get away with different storage options for different periods of time," commented Peter Botta, a grain hygiene specialist for Australia's PCB Consulting, in the April 20 edition of Stock & Land. "When things are urgent at harvest you can ground dump for a few weeks, then in the short-to-medium term grain bags and unsealed silo storage is fine, but for long-term storage you really need a gas-tight sealed silo."
Grain surpluses always put farmers in a difficult position. They may sell their grain immediately to commercial grain storage operators, but may not get a very high price for it when the market is so glutted. On the other hand, if farmers store the grain themselves, hoping to sell it later in a better market, they are faced with the problem of being responsible for hygienic storage conditions that will not reduce the value of the grain. Farmers in the UK lost some grain they had stored themselves to flooding this year.
The same conditions that put farmers in a difficult spot provide grain silo operators with an opportunity. Silo operators can buy the grain and store it, thus bearing the risk that something may happen to reduce the value of the grain, but also receiving the potential benefit of being able to sell the grain later for a higher price than the price at which they first purchased it.
In the UK, farmers are considering a third option. Rather than storing the grain themselves or selling it to grain storage operators, they could retain ownership of the grain but have it professionally stored by smaller storage specialists. Doing so might make it easier for farmers to market their grain in smaller packages and get higher prices than they get when they sell it in bulk.
"It is not something we are doing yet," commented grower Ian Hastings in the UK publication Stock and Grain last month, "but we are certainly considering looking at those niche opportunities, in spite of the fact it seems ridiculous to be replicating the bulk storage system."
Using a self storage facility to store grain might not be ridiculous, but it would be a fairly unconventional, or perhaps creative, use of such facilities. To store grain, a self storage facility might have to set up a specialized storage area that would meet even more rigorous storage requirements than the climate-controlled storage units that are used for wine storage. It might be necessary to find a way to offer units with continuous air flow to help keep grain dry, for example. Alternatively, it might be possible to make do with less carefully controlled climate conditions if grain were stored for relatively short amounts of time.
Sources used:
Dreibus, Tony C. and Wilson, Jeff. "Wheat surplus largest since 2002." Wichita Eagle. April 13, 2010.
Heard, Gregor. "Grain hygiene problems only going to get worse." Stock & Land (AU). April 20, 2010.
Heard, Gregor. "Rock and a hard place for growers storing grain." Stock & Land (AU). April 21, 2010.
Hemphill, Peter. "Wheat stocks at ten-year high." Weekly Times. April 1, 2010.
Hildebrant, Dale. "Farmers' grain bins bulging with cereal grains." Farm & Ranch Guide. April 9, 2010.
Seshan, A. "Coping with the wheat crisis." Business Standard (India). April 17, 2010.
University of Kentucky College of Agriculture. "Warmer weather calls for close monitoring of stored grain." The Horse. April 21, 2010.