Higher yields put grain industry back on track

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A return to better crop-production weather and larger corn and soybean yields have combined to give much of Indiana’s grain-handling industry a full workload after the 2012 drought left it with little grain to store, transport or process.

Indiana has nearly 1.3 billion bushels of grain storage capacity, and according to Purdue University estimates, about 30 percent of it sat idle last year. That represents the largest underutilization of the state’s grain storage capacity since the 1988 drought.

“The annual value of the Indiana grain industry at the farm level is nearly $10 billion, so to not use 30 percent of the capacity had considerable economic impacts across rural communities in terms of lost jobs and reduced hours for workers,” said Chris Hurt, Purdue Extension agricultural economist.

Grain storage is a fixed capacity, meaning the associated costs continue even if there isn’t enough grain production to use it all. That capacity has to be in place for high-production years, but in low-production years similar to 2012, it comes with continuing costs and no returns.

The economic implications weren’t limited to just grain storage, though. Processors of biofuels, food, animal feed and other products made from corn and soybeans also slowed production because of a lack of grain and extremely high prices for grain that was available.

“Indiana is a major grain processing state, so those industries are now returning that idled capacity to work after periods of shutdown in the past year,” Hurt said.

The drivers behind that return to work are a corn crop that’s expected to be near a record-high 1 billion bushels this year and near-normal soybean production around 250 million bushels.

Hurt said the combination of the two crops will use nearly all of the state’s storage space.

“We expect about a 5 percent underutilization, and it turns out that over the last several decades, that’s been about normal,” he said.

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