Grain baggers: costs, logistics, and market opportunities

Chris

Barron: Hey everybody, before we get going on today's podcast, want to remind you that the registration is open for the Ag View Executive Business Conference held in Phoenix, Arizona this year, January 21st through the 24th. Go on to the Ag View Solutions website, agviewsolutions.com, and click onto the conference tab and you'll be able to go in there and look at all of the great things we have planned for this year's conference. A ton of great educators that'll be there. And so go in and check it out. We look forward to seeing you at the conference this year. Thanks. Welcome everybody to another episode of the Ag View Pitch. Today we are going to talk grain baggers. We are recording this on the 16th of September. There's a lot of harvest going on, there's a lot of harvest that will be going on here in the next couple of weeks, and probably some guys in the south that are already done.

But we want to today talk about grain baggers. Everybody's talked all, all season, especially through the summer about how great the yields are and how a lot of people didn't have a lot sold. And there's just extra bushels that a lot of people are like, hmm, I wonder what we're gonna do with these bushels and how we're gonna handle it. Do we take 'em to market? Do we, you know, do we find grain bins that, or do we haven't used for 15 years? Do we get grain baggers or what? And so today we're gonna talk specifically about grain baggers. Got with me today, Jared Creed and Zane Erickson. Jared, how's it going?

Jarod

Creed: Good morning, Chris. Thanks for the invite, as always.

Chris

Barron: You bet. How's it going with you, Zane?

Zane

Erickson: Very good.

Chris

Barron: Good, good. So we'll get started here. We're recording this early in the morning. I said I look like crap and you guys look like you're wide awake, so we'll get started with, uh, with Jared. He's, he's pounding the coffee there. So Jared, talk a little bit about, you know, um, and I want to stay on the topic of Grain Baggers, but talk a little bit about, you know, what were the— what are the benefits from the marketing standpoint? You know, you're the marketing guru here. Talk a little bit about that?

Jarod

Creed: Well, without a doubt, this is the first year in many, many years that we've had a substantial carry that actually justifies further action of holding grain off market in a certain period of time. There's been 3 or 4 consecutive years here that net of interest expense, it just didn't make sense not to ship anything and everything that you were producing as fast as you possibly could. And then the logistics piece comes into play. And obviously you and Zane will talk about that. But we are without a doubt in a different market structure, what have you, than what we've been in for years. You have this fear of this glut of corn coming to us and a glut of soybeans coming to us in such a short amount of time.

But our system is more or less getting hungrier and hungrier and hungrier for especially the corn long term here, you know, we're going to have near record export corn, excuse me, near a record corn export program. And you're going to need to feed that system on a monthly basis. So therefore, you're looking at a lot of cash carries today, especially in the western Corn Belt, exceeding 40 to 50 cents a bushel between this fall and April-May timeframe. And quite frankly, I don't know if it's not going to get a lot wider than that. With not really the fear of nearby basis getting much, much weaker, but rather seeing a continued strength in basis post-harvest into the spring. And again, to feed the demand monster that we have slowly but surely built in the last couple years.

Chris

Barron: I guess I want to, I'll come back to you, Jared, and appreciate those comments. Zane, talk to me a little bit, or to the listeners here, a little bit about grain baggers. So tell them a little bit about yourself, where you're located, and, and what you've seen on the response with grain baggers and what guys are thinking and why.

Zane

Erickson: Yeah, so I'm the president of North Star Ag. We're from Tower City, North Dakota, which is 40 miles west of Fargo, right on I-94. As far as green begging is concerned, we got into green begging about 2014, if I remember correctly. And if I remember, we had a very similar market to what we have now. I'm not a marketing guy, but a lot of the same, a lot of the same things were going on in the green market as what's going on today type of deal. So, um, back in 2014, I got into it almost reluctantly, um, not knowing kind of a lot about grain bagging, um, but got enough requests where I said, well, this is something I got to look into. Um, and then here we are 11 years later. Um, you know, we've kind of taken on, uh, wanting to be the destination of grain bagging type of deal.

So we really take pride in being able to get guys going, starting from not knowing anything about bagging and hopefully becoming very adequate in bagging by the time we get done teaching them. And then on the, on the flip side, on our farm, we've, in the last 10 years, we've used bagging probably 50% of the time and really made it an effective part of our harvest.

Chris

Barron: So I'm going to come back to Zane, but Jared, You kind of like we do work kind of all over the, the U.S. Is there areas from your perspective that are, would be more advantageous for baggers, or, you know, adding that in instead of trying to sell and move the bushels, um, just like you were talking basis and different things, or, or is every area pretty similar in this year?

Jarod

Creed: Uh, that's probably a safe bet that west of the Mississippi is a quote unquote, better area for bagging this year, given the carry in the cash market. East of the Mississippi, maybe not quite so much. And I would go— I would be careful under the idea that there is a certain area year on year that it makes more sense. This year, without a doubt, the board is at a wider carry. Than what we've seen for years. And again, going back to the net of interest, I'll let Zane talk about the monthly expense or the expense to bag. But we've been operating on the idea that between storage and interest on corn, you're going to rack up somewhere between 4 to 6 cents a bushel of cost every month. And we've been operating on that for the last couple of years. And finally, it works. There's actually a net money to be gained above and beyond paying those monthly expenses.

So long answer your question there, Chris. But it's— I don't view bagging as a bet on a come on price. A carry is only a carry as long as it's sold. And as these decisions start being made, as harvest comes, and we're deciding to hold this stuff off the market, there's going to need to be more and more and more carries sold. So you're not You're not going through the motions in this just to put it in any type of a storage and pull it right back out at the same price that it was when you put it in.

Chris

Barron: I should have worn my store and ignore shirt. I have one that says store and ignore, so that would have been fitting. But, um, so, you know, Zane, then I'm going to come back to Jared on this question, but I want to ask you first some practical questions, and I want to start with cost. Because, you know, as Jared just said, you know, we look at commercial storage and the cost of that, it's like a— it's just almost impossible to justify. But on the same token, we have all these other options, namely bagging. Talk a little bit about the logistics and the cost. So, you know, what's it cost? What are the bag sizes? And what's it really cost to get into the market or to get into that process?

Zane

Erickson: Yeah, so a bag is, um, a 10 by— the two most common bags are 10 by 300s and 10 by 500s. Uh, 10 by 300s are 13,000 bushel roughly, depending on your test weight, uh, and the 10 by 5s are about 22,000. Um, the cost of a bag on a per bushel basis is roughly about 8%, 8 cents. Um, and my general rule of thumb is you can take your, your bag price per bushel and times that by 3, and that will give you a really safe number to factor in when doing your numbers on whether it pays to bag or not. So what that's— the times 3 is going to figure in your cost of your bag, your machinery depreciation, your time, your fuel, all the expenses that go into bagging. So like right now it's 8 cents. It's gonna cost you about, you know, 25 cents in and out by the time you get all said and done. That's a pretty conservative number.

Most of the time when I get all said and done and factor it in, it's more like that 17 to 19 cents. But I always tell customers like when, if they're looking at buying a bagger or even renting, that figure on a quarter, um, or figure on the, the 8 cents times 3 or whatever you want to use as a figure, um, and then you'll be happy. As far as the machine cost, um, baggers, um, range depending on which one we're talking about, range anywhere from about, uh, low 40s to mid 60s. Um, the low 40s, low to mid 40s are going to be more your standard bagger, you're gonna have to have a green cart to dump in it. Where when you get into the mid-'60s or even, I guess, some of them will get into the mid-'80s, you can dump a truck into them. So you have what they call a truck unloading auger that they'll work in the bags.

So on the flip side, on the unload side, the unloaders on the low side are about low 50s, and on the high side are about high 60s.

Jarod

Creed: So, hey, Chris, can I ask you a question? Then can you talk a little bit about the speed and efficiency of the equipment in the field?

Zane

Erickson: Yeah, yep. So there's two aspects to bagging, or a couple aspects to bagging. I always say it's a tool in the toolbox. If the one aspect is grain storage, and, and one of the things when I talked to Chris on Saturday was like, it'd be super awesome to have Jared on the phone and talk about the markets because, you know, there's not too many times where you get market and the efficiency of harvest. So if we can bag, we're gonna pick up marketing on the marketing side and the harvest efficiency, it's a, you know, it's a win-win. But on the harvesting efficiency side, what I always tell guys is it's a tool in the toolbox. It It's not just viewed as grain storage. We can also use it as— if you look at harvest and your dependence on labor, where are we the weakest in the farm? We're always weak on labor.

We can take our— we can bag in the field and we can take all our trucking requirements away. Well, which is one aspect. We use it on our farm mostly as an extended wet bin. So you can take your trucking away, you can speed up your dryer or speed up your combine so your dryer is not your bottleneck. And there's just a lot of things. Some guys will do it if they have an extended haul. Um, they'll say if they have a 35-mile haul and they don't have trucks to truck it properly, um, they'll go and bag in the field, and then after harvest, um, they'll go and pick it up. So it, it really alleviates the, the need for all the labor all at once. Um, and like in 2019, I figured it saved us about 9 days of combining, just because we were able to bag in combine in an efficient manner.

Chris

Barron: How, how quick can you load the bag? In other words, you got a Class 8, Class 9, what's it keep up with?

Zane

Erickson: Uh, the bagger is not the limiting factor, so depending on what bagger you could, you could run 2 Class 9s and it'll probably keep up for sure. Yep. The, the smaller bagger is 30,000 bushels an hour, the larger baggers, uh, like 55,000 bushels an hour. So The bagger is definitely not the limiting factor. It takes about— so say, uh, you end a grain bag and now you gotta load another grain bag on the machine. It takes about 10 to 15 minutes, um, with two guys. I've done it a couple times, um, so that's typically where you might get a little bit of hang up at harvest time, like when you're switching bags. Is, you know, that 15 minutes that you're not dumping into the bagger, you'll, you might get caught up with combines or whatever. But, but when you're, when you're going with the bagger, the bagger is definitely not your limiting factor.

Chris

Barron: The combine, we have it, we all have it at some point anyway.

Jarod

Creed: We have a mutual acquaintance, all three of us in northeast South Dakota, that will say they will try to catch the bagger by dumping 2 grain carts at a time, just wide open, just to see what happens, just to mess around. Never catches it.

Zane

Erickson: Yeah, it's great.

Jarod

Creed: Never catches it.

Zane

Erickson: Which, if you think about it, the Greenbaker has a 4-foot auger and it's 24 inches in diameter, taper deal. So like, it should never, never be the limiting factor.

Jarod

Creed: You know, I don't know what a capacity of a 24-inch auger is, but it's a lot faster than, faster than 99% of farmer legs out in the countryside.

Chris

Barron: Yeah, it's a little faster than a, than a 15,000-bushel wet leg bin.

Zane

Erickson: Yeah, yeah, I haven't found a grain cart that was a little swampy. Yeah, tapered hills. So no, that part is, um, is definitely not the slow part of harvest for sure.

Chris

Barron: Um, I have another equipment question for you from the, uh, Shortline equipment expert here, that, um, when you use one for a couple of years, if a person, you know, goes ahead and then go and builds a grain bin or something that they, they've needed or wanted or whatever, and they want to market that used bagger and unloader and stuff. What's the resale look like on that stuff?

Zane

Erickson: Resale is typically pretty good. Um, now I'll be honest, in the last 5 years, bagger sales hasn't been, been like gangbusters by any means like it has been this year. And I think due to a lot of market conditions like Jared's talking, the ones we've sold has been for harvest aids. Like last year we probably sold 10 baggers And they're completely all for harvest aids. So the ones that get sold for harvest aids are probably baggers that are going to stay on the farm for a long period of time. The ones this year, you know, we're selling all kinds of them that are strictly storage-based, we'll probably be reselling them next year. So say you take a $45,000 bagger, just for a round number, You should be able to get 30 to 35 over that next year, uh, as long as you're willing to carry it into harvest. You know, if you need to dump it by March, then yeah, it's gonna be a lot weaker.

Um, so a lot of times what we do on the baggers, um, so this would be our third year that it is like this. You know, we had 2016, 2018, and then now 2025 or whatever. Um, Well, a lot of what we did is we did consignments. So if you bought a bagger, used it for one year, then said, you know, I don't think I need this going forward, we'll turn around and consign it for you, bring it back in. There's not a ton of reconditioning, it's just kind of cleanup essentially, and then we'll resell for you. And the guys, it doesn't cost them a whole lot. Bagger equipment's fairly low maintenance, so as long as you take care of it, resells pretty pretty good.

Chris

Barron: That's good to know because I mean, I think the big thing is just access to the equipment and then accessibility to be able to remarket it if a person wanted to. What about renting and stuff? I mean, so what you're doing is that's kind of like a rental almost, is that right?

Zane

Erickson: Kinda, um, but the farmer takes the ownership. Uh, so 100%, yeah, we're helping all resell them and stuff like that.— but the farmer's still, still owning it. In slower years, we do, you know, if we have inventory, we do do some rentals. We just are not in the position to do that this year, just due to demand.

Chris

Barron: This easy— so a lot of them have been sold. So Jared, what's, what's it cost for— I've got a number, I want to know your number for either commercial storage or storing on your own operation on a per-month basis versus this bagger? How much, how much more?

Zane

Erickson: What's the—

Jarod

Creed: on a commercial level, that's going to depend on the discipline of the industry this year. And because it's already become the Wild Wild West, there are deals being struck on commercial storage that are comparable to the last couple of years when in theory it should be about double what it has been the last couple of years. So what would I call commercial storage today, before you consider the shrink, probably going from 15, 15.5 down to 14 for commercial storage on corn. And who knows what it'd be on the soybean side there, you're probably talking, I'll call the average 6 cents a bushel this year on corn. And the soybean side, I would add a couple cents to that. So you're going to be talking closer to 8, maybe even 9 cents in some parts of the world.

And a lot of that is, again, the market structure is dictating what the actual storage facility should be charging, or else there's this glob of grain that is stopping that facility from turning multiple times to be able to participate in the demand market that they have access to. So if you're going to be looking at any type of an open storage program as a farmer, you better be pushing a pencil really, really sharp. But then the on-farm storage, you know, I think there's a lot of various numbers there. But again, we're, we're pretty adamant that we have to charge ourselves somewhere 4 to 6 cents a bushel on corn, and 7 to 10 cents a bushel on soybeans. And that's net of interest as well. I think there's probably a lot of situations that we're actually not spending all that money. And especially when you think about turning your own facility.

I mean, we're talking on a Tuesday morning here, and we're forecasted to see some rain Wednesday, Thursday, Friday here this week. I am a huge proponent of I hope it rains some so we can flip some space and bins. We harvest for 2 or 3 days, run that stuff through the sites and get that stuff hauled right back out. I can't charge myself the same for those bushels that I would charge myself for the bushels I'm going to put back in. So that's more of what I would consider like an overhead cost versus an actual storage cost. But the second you go against a commercial storage scale, that's a commercial cost. It's not going to go away.

Chris

Barron: Yeah, interesting. I think we're getting a lot of things covered. Zane, what haven't we covered? Or Jared, is there anything we haven't— I haven't asked or anything?

Zane

Erickson: So one of the things we haven't covered is the moisture of the grain that can go into a bag. I get asked that question a lot. So it's different. Baging is different than traditional bin. So if you think about baging, it's an anaerobic environment versus an aerobic environment. So it's absent of air, essentially. So it doesn't really— as long as the integrity of the bag stays in place, it doesn't really have the potential to spoil. And I say that with quotation or asterisk, meaning don't, you know, let's not be silly. But like with corn, when we're, when we're bagging in the fall, so we're bagging in the month of October, I put a lot of wet corn in bags, like severely wet corn, to the point where I don't even like to tell people how wet of corn I put in some of the bags. Sabadillo. But like, To me, like below 18% on corn is dry in a bag.

It seems like 18% stores really, really nice. Like it doesn't, you know, dry corn stores on a bag type deal. We've done a lot of 25, 22 to 25 moisture corn, again, as our extended wet bin that we've held from October, November into March. And had zero issues. You know, the condition, you know, was the same as it went in. So there's a lot of— and what we found that, like, in 2019, we dried a lot of corn. Oh, we picked up all our bags and dried them in March. What we found is the dryer actually worked better in March than it did in December. And our temperatures were similar, but I don't know if it was the sun or— it was crazy how much more efficient the dryer was or whatever. So it was kind of a unique perspective. Um, but yeah, I'm not afraid to put wet, wet grain in a bag. Um, I guess the, the only thing I would recommend is, you know, don't store and ignore it.

Everybody, you know, when you, when you have wet corn or wet grain in a, in a bag, like, you know, don't run it into the warm months of the year. Like, you know, we're in North Dakota, so we have a northern climate. Um, if I put wet, wet grain in it, I'm always pulling it out before it warms up. So if we can put it in October, November, and then pull it out by March, that's what we're doing. If you're going to run it into July, you know, bakes have a lifespan of about a year. I've had guys go longer than that, but I wouldn't recommend it. If you're going to do that, it better be dry grain. You're just asking for trouble if you're not.

Chris

Barron: Sounds good. Jared, any, any thoughts from you to kind of wrap it up from your perspective.

Jarod

Creed: Yeah, I was gonna ask Zane, you know, when you— I think people show concerns at times about wildlife damage on bags. Can you speak to— sorry to put you on the spot here— can you speak to farm insurance and/or, you know, standard crop insurance? I shouldn't say standard crop insurance, but standard wind and hail policies cover a certain amount of dollars to first transit point of a crop. And I don't think a bag would qualify as that. So here you go, Chris, this is a discussion, not a question, not to put Zane on the spot. But have you seen anything on farm insurance that somebody has a split bag and has massive amount of damage from whatever may cause it? And the happenings from that?

Zane

Erickson: I guess I haven't heard anything on the insurance side. And that's maybe something I definitely could look more into. Holistically, if bagging is done right, you have very little issues. Like, so I probably myself on our farm bagged over a 10-year period, we probably bagged 100, 120 bags. And as far as wildlife, I knock on wood, I've had virtually zero. I've had some rodent issues. But the rodent issues consist of you know, chewing little holes in the bottom and you might get a little moisture in, but it really doesn't account for much, type of deal, like a, you know, scoop shovel full type of, you know. But it, it— one of the things that, you know, when we're doing it in the wintertime, it, it doesn't, you know, it's not warm enough, the conditions aren't warm enough for the mold to grow, type of deal. So like, they don't— it doesn't really rot, it doesn't really get spoiled.

Um, I had a a customer that I was actually helping unload a bag, um, they had a coon get into one of the sides, and it was just a small hole, probably the size maybe of a basketball at most. Um, and then basically where we bagged it, it was, you know, down a decent grade hill for, for what we would call it in North Dakota anyways. Um, and there was about 3 inches of water that got on the bottom of the bag the whole way down. Um, and this was in July that we were picking it up. And long story short, the farmer caught the coon because he was watching them. He patched the bag up. It did have water in by that point. He actually carried it for another 2 months. So I think the coon got in that April-May timeframe and we were unloading it in July. And yeah, it was a little, it was wet on the bottom, but it didn't spoil the corn. It was kind of a remarkable haul.

And then to be honest with you, he didn't even dry it. By the time it blended off into the truck, you didn't even know it was there type of deal, haul it right in, and, um, he had zero issues with it. So, um, a bag's fairly forgiving.

Chris

Barron: It—

Zane

Erickson: you just got to keep the integrity of the bag. So a couple rules of thumb is you don't stretch the bag, uh, you don't want it fiddlestring tight, and then anything that pokes it can, can zipper a bag. That's a, that's a bad day when that happens. Um, and then you just, you know, kind of watch it. Don't put it in spots that are going to be prone wildlife. And then make sure you're putting it in spots where, um, are, um, are not going to sit in water, are the next thing. Another thing that we ran into in 2019, you know, there's a fair amount of snow, is making sure your access to your fields are good. If you're going to pick it up in the middle of winter, that can be a challenge at times. And I can't— I have different feelings. In 2019, we had I think we had 20 bags spread out over all the fields, and we had 8 of them in one field.

Because it was a section, I think we had 1,000 acres, and I, you know, basically on each side of the Prairie Road, essentially. And that worked good for snow removal, but it was also down a really nice Prairie Road that was only a quarter mile off the highway. So I thought it was going to be fine. Yeah, it worked okay. But I don't know if I would bag there again, I might pick a different spot. But sometimes you bag where you have to, you know, like there's multiple times, you know, back 8 years ago when we used to raise Enogen corn, when we'd have to switch fields and we'd have to wait for the dryer to clean out, you know, the wet bin to clean out to switch over from Enogen back to regular corn. And at that time we would bag. So sometimes you didn't have a choice of what field you're bagging. It was just, we're going here next and we're bagging. Take what you owe.

But just making sure you keep everything in mind. Placement of bags is key, especially if you're going to have like a bagging site. Placement of bags and the direction that you bag is very important because you got to keep in mind you got to unload the opposite way, the opposite way, and then the auger is always off to your right-hand side when you're sitting in the tractor seat. So making sure you don't lay the bags in a fashion that you can't unload them individually. You know, last thing I want to do is put 10 bags next to each other and put them so tight that you can't unload the middle bag if you ever have an issue. Um, I always like to do like a tight 2-gap, tight 2-gap, um, they're basically pairs of 2, and it's, it's basically a big S or Z or zigzag that you're, you're bagging in. So you can always unload those bags, uh, if there's ever an issue.

And typically the issues are not grain quality, it's, it's more like, you know, you get deer on top of them or, or something happens to the bag, but Again, not incredibly common, but it's definitely a possibility that, you know, wildlife can happen.

Chris

Barron: Sounds good. Well, hey, I think we've kind of covered the gamut here between the logistics, the storage, the capture and the market carry, and some of the practical uses. With that said, Zane, if people want to get a hold of you to ask you more specific questions, or if they're interested in, and some of the bagging equipment, how's, what's the best way to look you up and get ahold of you?

Zane

Erickson: Yeah, so our website is northstar-egg.com or give us a call at 701-361-4790. Um, or you can always send us an email at sales@northstar-egg.com.

Chris

Barron: Sounds good. And, uh, you're, you're, uh, once again, you're, you're an expert on the baggers because you're dealing with a lot of them right now. So that's, uh, it's a good time, good time to talk about it and get ahold of you and do some research if a guy needs to.

Jarod

Creed: So.

Chris

Barron: Hey, Jared, really appreciate your time today. And Zane, thank you a lot. Appreciate it.

Zane

Erickson: Yeah, thanks for having us.

Chris

Barron: You bet. And with that said, we will catch you again next time on the Aggie Pitch.