Drought Impacting Local Grain Elevators

The drought had a major impact on most farming operations, but it also has had a big impact on Indiana agribusinesses.  While lower than average yields are impacting a farmer’s bottom line, they are also impacting grain processors and merchandisers. Ben Breazeale, with Cargill in Lafayette, told HAT, “If you are a processor, it has become very difficult to source grain. If you are a local elevator, you are not handling as much grain as you would normally.” He added, however, that the volume of grain moving though the system is better than had been expected earlier this year. Country elevators make their profit on the volume of grain moved, so less volume means less profit.


Not only is the lack of quantity a problem, but the quality is also an issue. According to Breazeale, corn infected with aflitoxin has been a serious issue. “From the beginning of harvest, we have been testing about every load, and we are continuing to do that today.”  He said the situation varies in different parts of the state with areas hit harder by the drought having a bigger aflitoxin problem, “We have had to reject several loads.”


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Some farmers forward contracted to deliver grain this fall; but, with poor yields, some of those contracts may not be able to be met which poses yet another challenge for local grain dealers. Breazeale said there have been several cases of growers not being able to meet their contracts, “Although the situation is not as bad as it could have been, because there were fewer contracts written this year than normal.” Yet, contract defaults pose a serious threat to the financially viability of local grain operations, “Just a few defaults can really put an elevators in a serious financial position.” He continued that running a grain elevator is a very capital intensive business and contract defaults can take an operation down very quickly.  Breazeale says most Indiana operations will survive these challenges, but admits there could be a few that do not.



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