Grain companies seek extra storage as trade war continues
ARVILLA, N.D. — Farmers stuck with low-priced soybeans and edible beans due to trade war tariff retaliation are looking for places to store a big crop until marketing returns to normal — perhaps six months away.
One company, Columbia Grain International LLC at Arvilla and Larimore, N.D., has leased two large flat storage buildings 21 miles away near Grand Forks to store edible beans and soybeans for delayed-price marketing.
"North Dakota is kind of the 'whipping boy' in my terms because we send 75 percent of our (soybeans) off the PNW (Pacific Northwest)," Tyler Stegman general manager, CGI Arvilla, N.D. says. "We're kind of held hostage by the fact that we don't have a lot of local processing capability in the state."
Stegman says it's unlikely there'll be a large rally in either basis or futures markets until grain can start flowing.
"Even if the tariffs came off today, we're backed up enough that we might not see normal grain flows until next year (2019) at harvest time," Stegman says. "This could be a six-plus-month ordeal."
Growers that need storage space don't have it and need options to turn beans into cash in the January to March time frame.
On the commodity grain side, the company owns shuttle-loaders in North Dakota in Oakes, Valley City and Arvilla, as well as in Shelly, Minn.
The Arvilla site handles wheat, soybeans and corn. It has 2.4 million bushels of grain storage space, typically "turning," or shipping its volume more than seven times in a year. This year, the "turn" may not change so much, but they'll be "holding soybeans longer than we ever have," Stegman says.
About 1 million of the bushels of storage are used for soybeans. Nearly half of the storage has been added in the past 10 years. The Arvilla site typically handles grain from 150 to 200 producers in a 45-mile radius.
"It's our opinion that things are compounding and getting worse," Stegman says. "Technically, out of the PNW, there are no shuttles going out at this point. And we don't foresee China coming back into the marketplace until late October/November. If that were the case, we're at that point already geared up, shipping corn. You put the time it takes to move grain from North Dakota out to the PNW and onto boats, you're looking at going to China in December."
CGI figures it will only have the ability to ship from December to February before they face competitive pressure from South America from March through June again.
"If nothing moves before that time, everything's going to build up," Stegman says. Farmers may need to store beans to June or July of next year.
Stegman hopes to get the soybeans moved out of storage by next summer.
CGI will charge farmers 8 cents a bushel per month for soybeans, up from the past charges of 3 to 5 cents.
"It's what the market is demanding at this time," Stegman says.
The company is offering a multitude of "basis-fixed" options for soybeans, which farmers have an option of "taking an advance" against, which may be helpful for farmers dealing with lenders.
In a normal year, the basis — the difference between the Chicago futures price and the local cash price for soybeans — is about 70 cents to $1 per bushel.
"This year, basis has been as high as $1.75 per bushel and could go even higher as the normal flow of grain has been interrupted," Stegman says.
CGI knows plenty about Pacific Northwest impacts. The company is a subsidiary of Japan's Marubeni Corp. CGI's headquarters is based in Portland, Ore., and describes itself as the largest exporter of pulses in the United States.
As tariffs took hold in the summer, edible trade both to Mexico and the European market slowed down after the spring. North Dakota had a big crop last year, so carryover must be stored.
CGI works with pintos, navies, black beans, small reds and adzuki beans, using processing facilities in Walhalla and Merrifield, near Grand Forks. They clean them and package them and ship them out in bulk hopper rail cars, totes or 100-pound bags.
Edible beans are a specialty crop. Processors typically purchase them from growers as they come across the scale, unless there is a forward contract. There is no futures market.
Buyers usually purchase 25 percent of the crop at harvest, 40 percent by Jan. 1, and 75 percent by March. Most processor-receivers charge farmers a storage charge after Jan. 1, ranging from 10 to 15 cents per bushel per month, says David Scholand, CGI's edible bean manager in the region.
CGI typically ships out 80 percent by rail and 20 percent by truck.
"A lot of the product goes to Mexico — the pintos and black beans," Scholand says. "It's a heavy product, with not a lot of margins in it." Truck freight has gone up 25 percent in the past two years, in part because of new electronic log requirements for truck drivers.
"The longer we go, the further behind we get," Scholand says.
CGI's edible bean group had 1.5 million hundredweight of storage, and was looking for more. The company has a facility in Walhalla, , N.D., and learned of the facility at Grand Forks, owned by Nor-Agra Inc., of Walhalla. The leased storage allows an added 250,000 hundredweight of edible bean storage, or about 440,000 bushels. An equal amount of soybeans are expected to be stored in the second building.
CGI started putting pinto beans in their building about a month ago. North Dakota's edible bean harvest is variable but nearly two-thirds complete, overall, and Scholand expects the building to be filled before harvest is finished.
Each of CGI's leased storage buildings will hold about the volume to fill one 110-car shuttle shipment.
Beans will be about 7-feet deep on the sidewalls, and then up to 20 feet plus at the peak. "We've just got to get air on them, make sure we're putting them in there dry," at about 13 to 13.5 percent moisture.
CGI is piling pinto beans in one of its leased buildings and expects to pile soybeans in the other. Each is 300-feet long by 150-feet wide, provided with a certified truck scale. It's been set up to accept on-floor storage — bunkers built inside buildings.
"With additional storage comes additional risks, costs and headaches, logistically, but we thought it was in the best interest of our producers to give them some options," Stegman says.