To benefit from the market carry offered by ethanol plants or other processors wanting a constant inflow of grain, farmers must accept the storage risk, which includes keeping the grain in condition. That takes management and requires energy expense, but is there a payoff, and how closely should that grain be kept within parameters? As the outside air warms up and the humidity rises, grain storage issues are going to be on your mind.

This would be a perfect world without the mold that attacks stored corn, but unfortunately we have to deal with mold that likes warm moist bins of grain. The cost of prevention requires energy and management, and in turn there should be a return to that expense. Finding the balance is what a group of Purdue economists tried to find when they analyzed the profitability in storage, versus the risks. They estimate that $270 million worth of grain was lost from the 2006 crop due to mycotoxins in stored corn. As more ethanol plants begin operation, on-farm storage will have to bear the responsibility of maintaining grain quality.

Researchers have long worked on ways to control mold growth in stored grain, including sophisticated monitoring equipment. But the question of economic returns from those efforts remains unanswered. Typically, stored grain is cooled following harvest to minimize moisture content and mold growth. Late winter or early spring delivery means the management problem is eliminated, but summertime delivery requires grain moisture management and the threat of loss from mold growth and that negates the price premium being offered for storage.

Farmers who store grain know that mold growth is minimal below 50 degrees F. and 12% moisture. Harvest time drying and aeration usually take the grain into winter with success, and then any problems developing in the core of the bin can be minimized with some grain removal.

The Purdue researchers found the optimal mold management strategy involves continuation of conditional aeration even if grain is to be sold to the local elevator in March. Continuation of conditional aeration after the end of December is even more important if high quality corn is to be delivered to a food-grade corn processor later during the summer. They developed a formula for success for maintaining quality, if the corn is to be delivered to a food grade processor paying a 55¢ premium and a 3¢ per month storage fee:

1) If in-bin temperature is less than or equal to 42 degrees F. and the number of mold damaged kernels is less than or equal to 4% at any point during the storage period, then do not aerate but keep it at least for another 15 days after which you will have to monitor and decide again.
2) If temperature is greater than 69 degrees F. and mold damaged kernels is less than 5% then do not sell yet but aerate the grain conditionally (i.e., when the outside temperature is less than the in-bin temperature by at least 5 degrees).
3) If the in-bin temperature is above 51 degrees F. and mold damaged kernels reaches 6.14% any time before the first half of March, then aerate the grain conditionally and keep it until early in March to sell it to the local elevator. If it is any time past March, then sell it to the local elevator right away.
4) For the period before December, if mold damaged kernels reaches 5%, sell to the food processor because, no storage fee is paid until December and hence the risk of losing money from possible mold development is higher than the storage fees earned for the periods after December.
5) In the summer months, if the in-bin temperature is between 60 degrees F. and 96 degrees F, and the number of mold damaged kernels reaches 5.29%, then sell it immediately to the food processor. This is because, in these periods, the periodic damage from molds exceeds the storage fee paid per period.

Summary:
Delayed delivery premiums for contracted grain production can be lucrative, but will require management of the risk of the grain going out of condition, and that management should see a return. Whether the objective is to optimize a return, or minimize a loss of the price premium by overspending on energy expense, a farmer must achieve profitability by preventing mold growth. Creating a plan of benchmarks for maximum mold levels and grain temperatures can facilitate the decision-making process for delayed delivery of grain.