West Central Crane and Construction specializes in farm and grain elevator construction and repair including concrete grain silos, steel grain bins, flat storage, grain dryers and crane rental. With over 20 years of experience we are confident we can find a solution to your grain storage needs. Use this decision tool to compare the cost for on-farm storage, commercial storage, rental farm storage, or in a storage condominium investment.
Harvesting may progress faster if grain does not have to be delivered to an off-farm location directly from the field. A factor that has surfaced in recent yearsis the expanding market of corn for production of ethanol. Figure 1 below shows monthly patterns for average Iowa cash prices for corn and soybeans for the 2004 through 2013 marketing years.
Nearly one-third of Iowa’s corn and soybean crops are marketed off the farm during the harvest months of September, October and November. Grain storage in Iowa has traditionally included a mixture of off-farm (commercial) storage facilities and on-farm bins. The need for storage has varied from year to year, depending on the mix of acres planted to each crop and the yields attained. Each of these choices has advantages and disadvantages, related to the initial investment, the annual operating costs, income tax considerations, the amount of time required for grain management, long-term availability of storage space and marketing flexibility. Building storage bins on their own farmstead has traditionally been the favored approach to increasing storage capacity by grain producers. The initial investment is eligible for Section 179 income tax expensing in the year placed in service, within IRS limits. The major disadvantages to building on-farm storage are the size of the initial investment, the need to monitor grain throughout the storage period and the difficulty of disposing of bins if the need for storage capacity decreases later.
Condominium storage has been offered by commercial elevators for many years, but opportunities to invest in it tend to come about when there is a strong need for additional storage capacity in the state. Commercial elevators may be able to build storage capacity at a lower cost per unit than producers can build on-farm storage.
If the grain is ultimately merchandised through the same elevator, no additional transportation and handling is required.
Producers farming a large amount of rented land may not wish to build storage capacity on it without a long-term lease.
The tax consequences of condominium storage depend on the specific lease or ownership structure offered.
Many producers depend on the availability of commercial storage space to supplement their own storage when grain production is above normal, due to either higher than expected yields or increased acres. The producer pays for storage only for as long as it is needed, although there is usually a minimum charge.
If the grain will be fed to livestock and rations will be mixed by the same elevator, less handling of grain is involved. A major disadvantage to using commercial storage is that harvesting may be slowed down due to longer travel distances and time waiting to unload. Storage capacity may be conveniently located close to the source of production, avoiding delays in harvesting. Of course, the producer is usually responsible for managing the stored grain in an on-farm rented facility. The major cost of on-farm storage structures is the initial investment in the bin itself, plus the cost of site preparation, wiring, fans, concrete, transfer legs and augers.
Variable costs associated with grain storage include electricity to operate fans, insecticides and fungicides, fuel to operate augers, and the operator’s time for handling the grain in and out of the bin as well as monitoring grain condition. Renting storage from other farmers or landowners involves most of the same costs and management considerations as using on-farm storage. The cost analysis for renting commercial storage or investing in condominium storage is more straightforward.
A final cost that must be considered in any grain storage decision is the time value of money. Figure 5 shows an example of how costs for both on-farm and commercial storage can accumulateover time. Ag Decision Maker Decision Tool A2-35, Grain Storage Investment Comparison, can be used to compare the costs of grain storage alternatives. The initial investment cost for erecting on-farm grain storage, including the cost of hired labor, can be depreciated as 7-year MACRS property for the farm income tax return. Other fixed costs, such as property taxes and insurance, as well as all variable costs involving a cash outlay are deductible as ordinary expenses. Our project managers and foreman’s are all accredited operators and certified by the National Commission for the Certification of Crane Operators (NCCO) and ANSI Accredited Program Personal.
If you are looking for safety orientated and experienced operators with your crane rental, you’ve come to the right place!

Each of our pieces of equipment can also be rented with a certified and experienced operator if you would prefer us to operate the equipment! Is there a simple and uniform method of figuring a rental rate for farm grain storage?
In some cases grain storage rental is available from a commercial source (elevator) at an established price. A suggested rental charge for farm corn storage is about two-thirds to three-fourths of the local rate for commercial storage. Depreciation is the portion of the original cost of the grain bin that is counted as an expense each year. Return on investment in the facility is calculated by multiplying an expected return on investment (annual interest rate) by the average value of the grain bin over its expected useful lifetime. The rate of return on investment can be the rate at which money is borrowed, the rate at which money can be invested, or somewhere in between. Taxes can be figured by multiplying the local property tax rate times the assessed building value.
Insurance costs can be obtained from the insurance policy or use one-half percent of the original purchase price. An example of estimating the annual ownership costs of a grain storage bin is illustrated in Table 2.
In the case of a drying bin, separate charges can be made for each bushel dried and each bushel stored. A Decision Tool (electronic spreadsheet) is available to help estimate ownership for both grain bins and drying equipment (see Decision Tool C2-24).
Most on-farm storage is rented for a yearly rate since it usually cannot be used more than once a year. The lease agreement should clearly state who is responsible for managing the grain so as to minimize spoilage and other damage. Many ethanol manufacturing plants prefer to buy grain throughout the year rather than store large quantities on-site. Holding grain off the market until the following spring resulted in prices 10 to 20 percent higher than those available during harvest months, on average. However, marketing of the rest of the crop is spread out fairly evenly throughout the remainder of the year, as shown in Figure 2.
Figure 3 shows estimates of the total capacity for each type of storage existing in Iowa since 2004. The major disadvantage of this option is that it may be difficult or uneconomical to market the grain to any other buyer or processor once it is placed in the condominium storage. The use of such facilities may be a part of the farmland lease, or they may be rented separately.
If the rented grain bins are not well-maintained or do not incorporate current technology, the renter may be reluctant to upgrade them without a long-term contract. Fixed costs are those that occur regardless of the degree to which the capacity is utilized and for how long. However, this investment can be spread over the life of the bin, in the form of depreciation and interest on the capital invested. Note that once on-farm storage is constructed, fixed costs can be ignored when comparing the cost of utilizing it versus other storage options, or when deciding how long to store grain each year. Labor costs may be ignored if time spent managing grain does not compete with other enterprises.
Rental charges are based on the number of bushels actually stored, for the length of time they are stored, usually by the day or by the month. When grain sales are delayed beyond harvest, funds are not available as soon to pay down debt or invest in an interest-earning account.
It is typical for cost of commercial storage to start out lower than the cost of on-farm storage, but to increase faster. Bins and equipment are also eligible for Section 179 expensing, which means some or all of their cost can be deducted in the year they are placed in service. In addition, delaying grain sales beyond the beginning of the tax year creates a tax deferment. Although the majority of our crane operation is on our construction projects, we do crane service and crane rental for our customers throughout Central Minnesota. Besides cranes we have many other useful pieces of equipment that can help simplify your unique project. Average grain storage rental rates can be found in the Farm Building Rental Rate Survey (North Central Farm Management Extension Committee) and AgDM Information File A3-10 Iowa Farm Custom Rate Survey. For example, to compute a farm storage rate for corn for six months, first identify the commercial rate. Only one-half of the original purchase price is used because, over the life of the bin, its average value is only half of its purchase price.

To estimate annual repair costs use a rate of one to two percent of the original purchase price of the storage bin.
With this method the bin might be used for one month, six months, or all twelve months of the year. The rental arrangement can specify that a minimum charge is paid at the beginning of the lease period with the remainder due when the grain is removed, or the entire amount can be paid when the grain is removed. The ideal situation is to have a separate electric meter for the grain storage bin so the actual electricity cost is known.
This does not take into account price advantages that may have been gained through the use of futures and options contracts.
The higher sales in January are likely due to producers deferring taxable income into the next accounting year. Recent changes in the ratio of the price of corn to the price of soybeans have caused additional acres to be placed into corn production, increasing the total number of bushels to be stored even more. Care must be taken that additional storage structures fit well into the existing drying, handling and storage system, though. Finally, if the lease for the farmland is not renewed, the producer may find it difficult to store grain past March 1. Twenty-five years is a typical assumed useful life, but many grain bins are perfectly usable for much longer periods.
In addition, grain stored on the farm may need to be dried to a lower moisture level than grain sent directly to an elevator, resulting in additional fuel costs and shrinkage loss.
If corn is delivered at above number 2 moisture level, some drying and shrinkage costs will be incurred, as well.
The interest expense, either added interest from a loan or interest foregone from an investment, will depend on the length of time the grain is stored and the market price that could have been realized at harvest. The initial investment cost of condominium storage may also be depreciable, depending on the legal structure used.
Funds that would have been used to pay income tax on grain sales are available for use for an extra year. We will take the required time to ensure the crane lift is safe, and perform the work in an efficient manner to save you money! Remember, the fixed location of buildings often narrows the market to only a few prospective renters. Farm storage rates tend to be below commercial rates because the renter must provide labor, manage the grain in storage, and assume the risks of spoilage and shrinkage. A typical rate is an initial charge of 9 to 16 cents per bushel for the first 3 months of storage and an additional charge of from 2 to 4 cents per bushel for each additional month.
For example, the first year the bin is worth $65,000, but each year thereafter the value declines due to depreciation. If the tenant desires to lease the grain storage beyond that time, a new leasing arrangement should be made. However, there may be just a single electric meter for the entire farm, so the electricity usage may need to be estimated. The length of time that grain will be stored affects the cost of renting commercial storage relative to owning on-farm storage, since rental fees are usually charged by the day or the month.
Adding capacity to an existing storage facility will usually cost less per bushel than investing in a completely new facility.
Finally, there is some risk of quality losses due to spoilage or additional fines and foreign material from storage on the farm.
Higher transportation and labor costs may be incurred if the rented storage is located a significant distance from the producer’s home base, and grain may not be checked as frequently. Nevertheless, commercial storage rates serve as an unbiased indicator of storage costs that reflect current supply and demand for grain storage.
The annual depreciation (percent) of a grain bin with an expected useful life of 25 years is 4 percent (100 percent divided by 25 years equal 4 percent per year). The electricity used by the fans and stirators can be estimated by multiplying the number of hours each motor runs by 85 percent of the horsepower rating of each motor, by the cost per kw-hr of electricity used. There also may be a handling fee if grain is withdrawn from the condominium storage instead of being sold to the same merchandiser.
However, it should be considered in the decision to store grain or sell it at harvest, or the decision about how long to store grain.
However, in some cases it may be more convenient for the owner of the bin to check the grain and turn fans on or off.
A custom rate fee for managing stored grain can be found in Information File A3-10, Iowa Farm Custom Rate Survey.

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Comments to «Grain storage rental agreement bc»

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