Growth in U.S. grain storage capacity is slowing

By Max Fisher, Vice President of Economics and Government Relations

An article on U.S. grain storage capacity published Nov. 25 in farmdoc daily, a publication of the University of Illinois’ Agricultural Economics Department, analyzes grain storage capacity between 1988 and 2019 and reveals the following four trends:

• Grain storage capacity in the United States consistently increased for the last 20 years and the growth has been proportional to increases in crop
• Off-farm (i.e., commercial) storage capacity has grown faster than on-farm capacity in the 2000s and 2010s, but that growth is slowing because of uncertain benefits. The significant investments in off-farm storage suggest that grain merchants who own and operate that infrastructure will remain an important part of grain supply chains because they play an important role in mediating commodity transformations in time, space and

The article notes that off-farm capacity has grown faster than on-farm capacity in all regions. Off-farm capacity was 46 percent of total capacity in 2019, up from 43 percent in 2000. The researchers said while this change in off-farm share is not extreme, it contradicts the narrative of a growing role for farmers in the grain storage and handling activity traditionally performed by grain merchant firms.

• Storage capacity utilization increased in the 1990s and has been relatively flat since then. Low margins may encourage increases in capacity utilization.
• Corn consistently occupies most U.S. grain storage capacity by volume, but other commodities make significant use of storage infrastructure in specific times-of-year, or when grain movement is disrupted and demand for storage

The researchers said U.S. grain storage capacity bottomed out at about 19 billion bushels in the late 1990s after years of decline. The researchers pointed out that before the 1990s, U.S. government agricultural policy encouraged much higher levels of grain stocks and consequently much more grain storage infrastructure was built. Even though crop production increased in the 1990s, storage capacity did not since U.S. government agricultural policy was no longer encouraging grain storage reserves.

Storage capacity growth since 2000 has been related closely to increasing crop production and storage capacity reached approximately 25 billion bushels in 2019. During the last 20 years, crop production has increased an average of 339 million bushels annually while average annual grain storage capacity increases have been 349 million bushels.

The researchers found that storage peak utilization grew throughout the 1990s by a total of approximately 10 percentage points and maintained the higher utilization in the 2000s and 2010s.  Over the study period, the researchers also found that storage utilization deceased in the summer and increased in the fall, attributable to noteworthy changes in summer crop production (wheat) relative to fall crop production (corn and soybeans).