Producers invest profits in bins, other large itemsMonster harvests, strong crop prices and favorable tax policy are creating cash that farmers are using to invest in giant grain bins, farm machinery and new buildings.
By: Ross Dolan, The Daily Republic
Monster harvests, strong crop prices and favorable tax policy are creating cash that farmers are using to invest in giant grain bins, farm machinery and new buildings.
“It was the biggest year we’ve ever had,” said Bob Goodnow, owner of Bob’s Farm Service in Armour, which specializes in the construction of grain bins and hoop buildings.
Goodnow, a 35-year veteran of the grain storage business, was on the verge of retirement — until 2011 when his company built about 120 grain bins.
Suddenly, retirement wasn’t quite so attractive.
“I should quit, but it’s been too much fun,” said Goodnow, 71. “It was a phenomenal, amazing year for us in the grain-bin business. We got done late, but we got ’em up.”
Getting done on time was important to take advantage of federal stimulus bonus depreciation deductions that will allow farmers to write off 100 percent of new equipment, farm buildings and grain bins on their 2011 taxes.
That 100 percent bonus depreciation is scheduled to roll back to a 50 percent bonus in 2012 unless Congress acts before the end of the year, said CPA Dave Olson, a partner in ELO Prof. LLC in Mitchell.
“We’ve been very fortunate in this part of the country that agribusiness has been as successful as it has been,” Olson said. “It has really helped to sustain our economy, and our agribusinesses have reinvested a tremendous amount of their profit into new equipment and new construction, which has been very good for holding up our local economy.”
Olson said it’s important to understand that farmers must spend the money to get the deduction.
“The money they make is going right back into their buildings — it’s not going into their pockets. It’s going into their farm operations, so they are putting the money into the economy as well.”
Brenda Bode, who farms north of Mount Vernon with husband Lyle and is also chairwoman of the Davison County Planning and Zoning Commission, agrees.
“The extra building doesn’t only benefit farmers, it also benefits the local economy and helps to strengthen the county’s tax base,” she said, since farm buildings are taxable structures.
Goodnow’s company built bins ranging from a modest 10,000-bushel storage unit to a 360,000-bushel monster.
“I did some figuring, and the average bin size we put up this year was 45,000 bushels,” he said. The party still isn’t over, believes Goodnow, since the tax incentives are still sizable.
Bins are priced according to per-bushel capacity. Like shoppers who get a better deal by purchasing the “large” or “economy-sized” version of a product, farmers get more bang for their buck by purchasing larger bins.
A 10,000-bushel bin, for instance, might cost about $2.50 per bushel to construct, or roughly $25,000, while the construction costs for larger bins can be as low as $1.50 per bushel to construct.
“Not many years ago, 10,000 bushels was a big bin; now it’s at the bottom of the lineup,” Goodnow said.
At 90 feet in diameter and 82 feet high at the peak, Paul Mayclin’s 360,000-bushel bin is a beast.
“We added a big one,” acknowledged Mayclin, 52, who farms near Plankinton with his brother John and brother-in-law Tom Spinar.
Adding grain storage has been part of a long-term marketing strategy for the family owned farm, which has been adding about a bin a year over the past 15 years, Mayclin said.
The reasons for building the bins are many, he said.
“Some of it is expansion, some the improvements in yields, and some the cash rewards for being able to hold onto the grain and sell it later in the year when prices are higher.”
“We’re 25 to 50 miles away from any place we could haul grain to,” added Mayclin, who owns trucks to haul his own grain. Without storage, however, those trucks would be sitting in line for hours at grain elevators.
“That would require a lot more trucks. With the extra bin storage, we dump grain into bins and keep harvesting. It’s a lot more efficient for us. We aren’t wasting a bunch of time driving and we can sell it at our own pace at the best price.”
Modern storage bins are considerably more sophisticated. They are equipped with temperature cables that alert the farmer to hot spots, which might indicate spoilage.
“If you monitor the bins and keep air on the grain, it can keep for years,” Bob Goodnow said.
Paul Fergen, of Ethan Co-op Lumber, and Ben Endorf, of Palace Builders, in Mitchell, said the last few years have been extraordinary for their companies also, but their respective companies focused less on grain bins and more on steel buildings and pole barns for equipment storage and maintenance.
“When farmers have the money, they spend it and that helps everybody,” Endorf said.