Temporary and Emergency Storage of Grain

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1 Temporary and Emergency Storage of Grain Prepared by Bureau of Business Trade Practices July 2012 The Department of Agriculture, Trade and Consumer Protection administers Wisconsin s Agricultural Producer Security Program. The purpose of the program is to provide assurance that producers will be protected against a default for grain that they store or grain, milk and vegetables they sell. This paper focuses on the grain storage aspects of the program, and the growing trend of grain elevators utilizing various types of temporary storage structures. Over the past few years department auditors have observed an increasing number of grain warehouse keepers storing depositor grain in Ag Bags, ground piles, and various other temporary structures. Not only has the number of temporary storage sites increased, but there has also been an increase in both volume and time that these types of storage sites remain in use. The Producer Security statute and administrative rules include only general requirements that licensed warehouse keepers store all depositor grain in a warehouse and maintain the quality and quantity of the grain in that storage space. State regulations do not distinguish between permanent, temporary, or emergency storage. Ground piles and temporary storage structures have been constructed and maintained in a variety of ways, each with very different levels of effectiveness in maintaining the quality and quantity of the grain (mainly corn). Some less effective examples of temporary structures we have seen have resulted in uncovered corn that was steaming, excessive crusting, and thousands of bushels being lost and unsalvageable while removing and reclaiming the corn. Under current regulations, grain warehouse keepers are out of compliance only after the quality of the grain has already deteriorated or if the grain has already been placed in an unconfined pile. As a result, the current remedies utilized by APS are only reactionary. If a warehouse keeper has a history of storing grain in unlicensed space or has allowed an open-air ground pile to abnormally deteriorate, we may cite the grain warehouse keeper for repetitive compliance issues and require the warehouse to provide us with a plan on how they will avoid future unlicensed ground piles and abnormal deterioration. Warehouse keepers may also face licensing action to address recurring storage problems, including issuance of a conditional grain warehouse license that requires the warehouse keeper to take certain actions in an effort to prevent future violations. But again, these remedies are only available after deterioration and loss has already occurred. A shortage of permanent grain storage capacity is a trend that is resulting in more frequent use of temporary ground pile storage of increasing volumes. Industry projections are for corn production to continue to increase in the foreseeable future which will continue to push the drying and storing capacity of grain facilities beyond their limits. Therefore, consideration must 1

2 be given to the need for a more proactive approach to temporary storage in order to help assure the safe keeping of depositor grain. Many grain warehouse keepers can, and often do, set-up emergency and temporary storage space in a manner that maintains the quality and quantity of that grain. Most surrounding states and the USDA allow for and regulate both emergency and temporary storage, some including additional fees and/or security. Temporary Storage Grain warehouse keepers use temporary storage to store depositor grain into the spring or early summer. Most states and the USDA regulate and license temporary storage space, as well as cover depositor losses under their programs, but usually only under certain conditions. The intent of regulations that specifically address temporary storage is to preserve the integrity of the grain by requiring compliance with certain structural specifications, only allowing storage of a certain quality of grain, and/or by establishing removal deadlines. Some states also limit the amount of temporary storage to a specific percentage of a grain warehouse keeper s total capacity. Regulations specifically addressing temporary storage specify a removal deadline ranging from March 31 st to July 1 st, or a set time period such as 6 months from request for approval of the space. Some states allow for extensions, but may require additional inspections and often at the expense of the grain warehouse. Most states and the USDA also have certain structural requirements that must be met prior to approving temporary storage capacity. First, many states regulate the base of a temporary structure, particularly base material, depth, and slope. Particularly, the base must be made of material such as asphalt, concrete, or compacted limestone (or similar material). The base must also be a minimum depth or able to sustain a specific weight load, and it must provide for proper drainage. Second, the storage unit often must have rigid and self-supporting sidewalls which some states specify as consisting of concrete, wood, or metal. Finally, the storage space must be covered. Some states specifically require the cover to be white or a specific thickness while others simply require it to be resistant to tearing under normal conditions and able to support persons walking on it without puncturing. Once the storage structure is determined to be adequate to safeguard the grain, consideration is given to maintaining the quality of the grain while it is being stored. At a minimum, most programs require aeration. Some states go as far as requiring aeration equipment specifically capable of providing specific cubic feet of air per bushel per minute. Another way some states assure that grain is being safeguarded is to require a temperature monitoring system within the temporary storage space. This allows the grain warehouse keeper to take action to remedy any warm spots in the grain prior to any significant loss of grain. Finally, some states specify that 2

3 only grain of a minimum quality and with specified maximum percentage moisture be permitted in a temporary storage structure. In summary, to help assure that temporary storage space can adequately safeguard depositor grain for a period of up to 9 months, a grain warehouse keeper must make certain there is an adequate structure in place. The grain needs to be covered. Finally, the warehouse keeper needs to employ methods to maintain the grain, including aeration, temperature monitoring, and/or maintaining minimum quality and moisture levels. APS staff have documented instances of significant grain damage when warehouse keepers don t utilize at least some of these methods. Emergency Storage While temporary storage can help alleviate a lack of permanent storage space for six to nine months, more and more elevators are forced to resort to emergency storage that lasts for three months or less. It is increasingly more common for warehouse keepers to become overwhelmed with grain coming off the fields during harvest. In order to avoid turning grain producers away, they have resorted to storing uncovered grain on the ground, and some of these uncovered ground piles are quite large. In Wisconsin, company-owned grain that is stored on the ground is not required to be licensed. However, DATCP auditors are finding more and more grain warehouse keepers storing depositor grain in ground piles. The producer security law requires all depositor grain to be kept in a licensed storage warehouse and does not have a mechanism that would permit DATCP to license a free flowing grain pile. As in temporary storage, most states and the USDA allow for and regulate emergency storage of depositor grain. For states that regulate ground piles, the main requirement is a strict removal deadline. Other states simply only allow company owned grain to be stored in ground piles. In addition to any license, inspection, and extension fees that may apply, some states also require additional financial security to be filed for ground piles. Some states also only allow a certain percent of a grain warehouse keeper s total capacity to consist of emergency storage. Grain facilities that are successful when using an emergency open air grain pile implement some, or all, or the following elements: choose an adequate site for the pile limit the size of the pile use some type of aeration system Employ moisture and cleanliness standards for grain placed on the ground 3

4 In regards to choosing or preparing a site, it is important to choose a naturally occurring high point on the warehouse property, ideally on concrete or asphalt. Some states require that emergency ground piles, like temporary storage, have a concrete or asphalt base and a slope away from the center, but other states are silent in that regard. Once again, like temporary storage, use of aeration may be helpful in maintaining a grain pile but it is not required by most states or the USDA. The quality, cleanliness, and moisture of the grain being stored will also determine how long the grain can be kept in a pile before significant heating or deterioration occurs. Ideally, only cool, dry, clean grain should be place in outdoor piles. If the grain is not dry or cool, then the grain warehouse keeper should consider using multiple smaller piles to allow for heat loss. Iowa has specific requirements for the quality and moisture of grain permitted to be placed in ground piles. As annual grain production increases and storage issues become a bigger issue for grain facilities, the use of both temporary and emergency storage is expected to increase. Ag Bags Along with grain piles and other temporary storage structures, APS staff have observed an increase in the use of plastic (polyethylene or polyvinyl) bag storage space or Ag Bags. These bags are typically loaded horizontally in a flat field and can be 100 to 300 feet long with diameters varying from 8 to 10 feet. Many of the same issues for temporary and emergency storage apply to Ag Bag storage. The surface on which the bags are stored should not have low points where water can pool. Unlike temporary and emergency storage, states often permit Ag Bags to be placed on dirt, turf or hay ground that s been mowed to prevent puncturing. Some states that permit this type of storage for depositor grain specify the quality and moisture of corn allowed to be stored in Ag Bags. Some states also have specifications for the bags themselves, such as white in color with a minimum thickness. There is a wide variation on the removal deadline for Ag Bags. The USDA considers Ag Bags emergency storage and requires removal by March 31 st, but they may grant an extension after an inspection. Iowa has a removal deadline of May 1 st, the same as its temporary storage deadline; however, Iowa also has very specific requirements for corn that is stored in Ag Bags. These requirements include quality and moisture specifications. The objective for all of these regulations is to maintain the quality and quantity of the grain, so if dry, cool, clean corn is loaded into Ag Bags on an adequate surface, it could be maintained for several months. In fact, Iowa will allow storage beyond May 1 upon inspection and approval. 4

5 Conclusion Temporary and emergency storage of depositor grain, while becoming a necessity for many grain facilities, is not a practice that is specifically addressed by Agriculture Producer Security regulations. While a majority of Wisconsin s grain warehouse keepers already implement many of the storage practices discussed in this paper, some do not. Most grain facility owners and management realize that losses due to improper storage practices are the responsibility of the business. As a result, proper preparations are made to help maintain the quality and quantity of the grain. However, there are grain warehouse keepers who do not take the necessary steps to handle excess grain stocks in a safe and responsible manner. This presents an uneven playing field for those warehouses that are storing grain responsibly. If allowed to go unchecked, producers could sustain losses if a grain warehouse keeper does not have the financial capability to absorb a loss due to improperly managed grain. As grain production increases each year, the issue of adequate storage space grows with it, along the increasing potential for a significant default by a grain warehouse keeper as a result of poor storage practices. Consideration must be given as to whether proactive requirements, similar to those outlined above, should be established to help prevent potential grain losses and to level the playing field for those grain warehouse already utilizing responsible grain storage practices. 5