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SPOTLIGHT
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Drought slows grain elevator construction boom

Published on -8/19/2012, 3:07 PM

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WICHITA, Kan. (AP) -- The nation's grain elevators, which underwent in recent years a construction boom to add storage, are now bracing for a drought-stricken harvest come fall that will bring in far fewer bushels to fill all those new bins and silos.

Among them is the Pawnee County Co-op Association in Larned, where the two 140-foot-tall concrete silos built just a couple years ago dwarf all the other buildings in this western Kansas community. In the past four years, the co-op has put in 1.8 million bushels of new storage at its four locations in western Kansas.

But with a deepening drought marked by intense triple-digit heat and lack of rain taking a toll on local crops, the co-op is closely watching its expenses in anticipation of far less revenue this fall to store crops. It plans to do preventive maintenance to ward off any catastrophic repair bills. And it does not expect to hire any seasonal workers like it usually does. The company now employs 32 full-time people at its four Kansas elevators.

"We try to take care of the full-time people as best we can -- and that means that instead of hiring seasonal labor, we'll work the full-time guy a little harder and a little longer," elevator manager Hugh Mounday said. "But at least he has a job versus cutting his hours and laying him off."

Nonetheless, this season's drought isn't keeping the co-op from going ahead with plans to add at least another 800,000 bushels of storage next year, Mounday said. The firm that builds those concrete grain storage tanks has a backlog of orders to fill, and then it takes time to put up elevators, he explained.

"This is long-term storage for us, we are short of storage space anyway," Mounday said. "It will still be there. It will rain again."

McPherson Concrete Storage Systems Inc., the McPherson company that builds the concrete silos for Pawnee County co-op and other elevators across the Midwest, said the firm has not had any cancellations despite the drought.

It is now booked with work until late fall or early winter, said salesman Roy House. A couple of years ago at this time, it was booked well into spring.

McPherson Concrete still gets calls every week from people looking to build new silos. Construction in the Dakotas has been busy, and a lot of work is still going on in Nebraska, House said.

Interest for new grain storage in Kansas has slowed somewhat -- but it is "nothing an inch and a half of rain wouldn't take care of," House quickly added.

Federally licensed grain elevators across the nation can now hold more than 5 billion bushels of grain, compared with 4.3 billion bushels in 2008, according to Farm Service Agency statistics. That does not account for the state-licensed facilities which comprise nearly half of the nation's grain storage capacity.

"Certainly (the drought) is going to have an economic impact, but our industry, like all of agriculture in Kansas, has had some pretty good years so they are certainly not at the brink of bankruptcy," said Tom Tunnell, executive director of the Kansas Feed and Grain Association, the industry's trade organization.

The Wind River Grain elevator in Garden City, which sits next to an ethanol plant, is among those that have added storage in recent years and is now scrambling amid a worsening drought to utilize its facility. The facility is equipped to load large unit trains of wheat to supply the domestic flour mill markets and buys grain from country elevators.

This year it expects to have to draw from other parts of the nation to supply enough corn to meet the demand from its local cattle feeders and ethanol producers.

Its grain merchandising manager, Charlie Sauerwein, said the elevator is considering not hiring seasonal workers but is not planning any layoffs of permanent staff.

"Most country elevators exist to serve the producer and in this environment it is tough to cut a service," Sauerwein said. "Sometimes you ride it out until the rains occur."

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