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Senior Contributor
Posts: 2,911
Registered: ‎08-11-2014
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I would think that farmers

would group together and build big bins and store their production together. They could build them in a nearby town next to a rail outlet or at a highway location. The benefits of scale would be an advantage and we could hire people to oversea our grain and make sure it doesn't go out of condition, It would be a huge advantage and less costly for most of us.

 

Oh heck I forgot we did try that. They were called co-ops

Honored Advisor
Posts: 15,055
Registered: ‎05-13-2010
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Re: I would think that farmers

Well, they have 40 sites and promise if the members only approve a merger making it 80 sites then there's a pot of gold waiting. Meanwhile you vote on directors you don't know so far away that are from a town you've never heard of.
Honored Advisor
Posts: 7,604
Registered: ‎07-18-2011
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Re: I would think that farmers

And how big is the pool of available candidates that can do a good job of managing that??

 

 

The benefit to the individual members dwindles with every stage of expansion.

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Advisor
Posts: 9,459
Registered: ‎02-06-2014

Re: I would think that farmers

Ethanol kinda changed the game in a lot of places though, as far as freight differentials go.

 

Don't know what kind of deals were/are being struck but back during the goldrush the buzz word was "origination" and the buyers were paying up for semi-captive sourcing from people who could effectively store large quantities for them.

 

At least at that time there was probably more return to scale on that side of the business than the much noted lower cost input purchasing.

 

Don't know if you can 179 a co-op, or even an LLC, but that was a big part of it all too.

 

If used halfway well*, handling and storage equipment probably showed a better return than a lot of things you could have spent Uncle Sam's money on.

 

Of course it sort of dials you into a certain minimum size. Nobody expects to get smaller but it does happen, or maybe sometimes should be a consideration.

 

*On that scale I think that usually means thinking like you're delivering to an elevator in the fall and marketing accordingly. It just happens to be your elevator, which is a distinct business unit and generally run like a commercial operation.

Advisor
Posts: 9,459
Registered: ‎02-06-2014
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business ideas

Probably have already been but would seem certain that sometime in the not too distant future there will be grain complexes of a size that would have made for a decent sized co-op 20 years ago around to be had for a couple dimes on the dollar.

 

If a guy could cut a deal with some intermediate size operators, there's probably a decent living to be had.

 

Seems that in most cases there would be a limited bid for a million bushel facility out in the middle of nowhere.

 

Or maybe those guys who were looking for "origination" would be interested in backing somebody to do it for them.

 

Probably like the country elevator biz has always been- if people think their check will clear (sometimes they didn't care if the bid was a nickel higher), there's a decent bid and you can get their trucks dumped and turned aorund, you can probably find grain to buy/handle.

Veteran Advisor
Posts: 905
Registered: ‎05-13-2010
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Re: business ideas

One of the problems with those "stranded assets" is  the need to perform a lot of "deferred maintenance" that was postponed as the handwriting was on the wall......can still be a good deal for some pooled bushels and we've seen it happen in several areas where an upgrade to handling 50K per hour was not in the cards...

 

I can recall providing the "encouragement" to many grain businesses within 50 miles to keep adding space while the ethanol buildout was in it's hay day........between that and the CRP ground that came out, our area feels a lot different than it did 5+ years ago...

 

here is a tidbit----long ago I analyzed CRP acreage  in our world and determined there was more "row crop" CRP ground within 65 miles of Eddyville than anyplace in the country....

 

Ray J

Honored Advisor
Posts: 7,604
Registered: ‎07-18-2011
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Re: business ideas

Problem is Nox most of those are either in very strong(financially) hands or time has passed them by.

The difference between a sorry slow(no one wants to use) facility and a very desireable facility is not measured in bushels or dollars. But is often measured in availability.... Not many farmers design facilities well for speed or grain handling.... Lets face it not many facilities run by coops are either.

If you have a fast in and out with good records, you can overcome most other problems and you don't have to be that big..... 

Local coop facility handles over 4m bu per year in a 600K facility with out a rail or town in sight.  60k is the biggest bin.  4 big legs, 6 overheads and 4 -1000 bu. dumping pits.(was built for growth)  Is 54 years old and still worth more than a 2 million bu facility with a slow leg...and one pit.   Design is pretty important.....

 

A bargain is a bargain and always will be...

 

Honored Advisor
Posts: 7,604
Registered: ‎07-18-2011
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Re: business ideas

Thanks ray I would have held back on mine some if I had seen your post....

 

We have several that have contributed to this forum who have some expertise in this area....  

Isc76at being one of them...

 

 

 

Advisor
Posts: 9,459
Registered: ‎02-06-2014
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Re: business ideas

Far NE IN, NW OH and a couple adjacent counties of MI would have been close to you on CRP.

 

Back in the day I worked up a suggestion, which never even got to the level of a proposal, that if anyone was actually interested in doing primary cellulosic crops that would be the place. Of course a lot of reasons why that didn't fly.

 

Net energy return for grain ethanol on the best NC IA ground might be as high as 2:1 but you have to work hard to pretend it is 1:1.

 

So purely from an energy point of view, breaking a lot of sensitive land purely for corn ethanol was a fools errand.

Advisor
Posts: 9,459
Registered: ‎02-06-2014
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Re: business ideas

1:1 on the CRP land, that is.