Category Archives: AG Production

Revolutionizing Grain Storage and Logistics

Bagged grain technology has revolutionized grain logistics and storage in Argentina, as well as in other producing countries of the world for the last decade. Since the beginning of agriculture, grain has been stored in oxygen. In a radical change from the past, grain storage in a silo bag is an airtight storage. The grains, associated microorganisms and insects breathe, ingesting O2 and producing CO2, creating a modified atmosphere within the sealed bag. This modified atmosphere creates certain advantages for the conservation of grains.

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There have been several attempts to store grain in a modified atmosphere to improve grain conservation. However, storing silage in airtight bags has provided the first successful results both commercially and on a large scale. In Argentina last year, the adoption scale of bag-stored grain was so large that out of ~100 million tons of grain produced, 55-60 million tons went through silo bags. The many benefits that this technology provides the entire chain easily explain its rapid adoption. Harvest can be accomplished in record time. A bagger can easily store what has been threshed by 4 modern combine harvesters. Silo bags have also allowed grain producers to keep grain at the production site, and thus encourage new businesses that previously were not available.

Finally, silo bags allow the producer to plan logistics in a much more efficient way. Collection companies have expanded their storage capacity, and thus reduced the fixed costs of their facilities. Using silo bags, the lack of capacity silos is no longer a barrier to shipping grain to port at the time of harvest.  

For exporters, silo bags allow them to participate in a much more aggressive grain acquisition policy as very low costs entice grain deposits in places where they had no presence before. In many cases, this has allowed them to double the volume stockpiled. They also manage to have strategic stocks with their crushing plants to stabilize the supply of raw material.

Bagged grain technology preserves grains for long periods of time with no downsides. The use of an excellent quality bag is essential. The cost of a bag is less than 1% of the value of the stored goods, thus an economical approach.

IpesaSilo™, Ipesa-Rio Chico’s trademark, is the leading bag in the Argentine market. IpesaSilo exports to more than 50 countries worldwide. Five years ago, the company created IpesaUSA as a distributor company working with farmers, dealers, and end-users such as co-ops and elevators countrywide. The cost of storage per bushel in silo bags in the U.S. is only $0.07 per bushel compared to traditional storage methods costing ~$1 per bushel.

The company has also expanded into Canada where grains are experiencing strong freight competition from mining, and have found that silo bags allow them to store grains in the field at low cost. In the case of South Africa, the company introduced grain bagging with Louis Dreyfus, and today 10% of the South African grain production is stored in silo bags.

Other countries where IpesaSilo has begun significant developments in the use of silo bags include Russia, Ukraine, Australia, India and China. Sales in Brazil reached the milestone of 45,000 bags and about 9 million tons of grain is stored annually. Brazil’s potential for the product is huge due to the lack of storage infrastructure and long distances between production areas and ports.

Grain bagging has provided the entire agricultural chain with a powerful storage and logistics tool, enabling the steady growth of grain production minus the inevitable bottlenecks typically experienced in traditional storage. Today, we know that agricultural expansion has no limits, and that storage is determined by the revolution of bagged grain.

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More Grain in Silo Bags, Better Quality

Silo bag grain storage is a common alternative for producers, middle-men and the grain processing industry in Argentina. During the last 5 years, roughly 40% of grain production in this country was stored in silo bags, highlighting the importance of this technology in Argentina. Moreover, silo bag technology is being exported to various countries across the five continents.

Silo bags are made of a three to five layers of plastic material (white on the outside and black on the inside) shaped as a 235 microns thick tube. The most typical bags are 60 m (200ft) long and 2.74 m (9ft) in diameter, can hold approximately 200 t (8000 bushels) of grain each. With equipment currently available, handling (loading and unloading) is very simple to perform. The bags can be assembled on the same production lot, or in an especially equipped area in the vicinity of the storage or processing plant.

The effect on grain quality of wheat, corn, soybean, sunflower and barley, on humidity and period of storage, was analyzed by Bartosik et al. (2012). Cardoso et al. (2009) studied the changes in the concentration of phosphine during fumigation of grain in silo bags, and Cardoso et al. (2012) implemented a pressure test to determine the airtightness level of silo bags and their evolution after being stored for four months in the field.

Cost calculation of storage in silo bags requires certain considerations. The equipment needed includes: bagger, extractor, self-unloading hopper car and two tractors enough to carry the hopper car and provide movement to the threads (one for the hopper car and one for the bagger and extractor). In addition to the costs of having ownership of equipment (depreciation, maintenance and interest), other expenses related to labor and fuel are required to be able to operate. The bag is not reusable, so whenever bagging is done it is essential to buy a new bag.

A typical Argentine grain storage operation using silo bags was analyzed. It includes the following sub-steps: 1) transport from harvester in the field to bagger, 2) bagging, and 3) extraction of grain. The subsequent transport of grain to collection, processing industry or port was not considered in the analysis, as this should be done regardless of the period of grain storage in silo bags.

The equipment required for bagging includes a bagger, an extractor, a self-unloading hopper car and two tractors. One of the tractors is also used for grain extraction. The bagger has a capacity of 400 t / h and requires power of at least 60 HP. The extractor has a capacity of 80-110 t / h (depending on the type and condition of grain), and requires power of 90 HP. The self-unloading hopper car has a capacity of 14 t and is equipped with a thread of 360 t / h capacity. To meet the power needs of this equipment two 90 HP tractor were considered, which can be used interchangeably for the bagger, extractor or hopper car.

This is a typical equipment configuration for a contractor that provides the bagging service to producers or middle-men in Argentina.

Table 1. Equipment Configuration for Silo Bag Contractor

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Equipment and supply prices were taken from magazines (Agromercado), and in consultation with suppliers. The equipment was granted a life span of 10 years, except the tractors which were allocated a life span of 20 years. The residual value of the equipment was considered 25% of its value, while the annual maintenance cost was set at 3% of its value (Table 1).

For more details on silo bag technology, or to learn more about Context in Latin America, contact Jim Eckles at Jim.eckles@contextnet.com.

Equipment Manufacturers Feel the Pain of “Doing the Splits”

Over the past 25 years, the majority of land farmed in the Corn Belt has flipped from operations with less than 500 acres to those with over 1000 acres. The implication of this trend towards the larger farm operation managing a greater portion of production area is simultaneously being matched by the signification of smaller operations, which still account for > 80% of the farming operations. Nearly 50% of the farms less than 500 acres are smaller than 50 acres, and are frequently categorized as lifestyle farmers. The effects of this increasingly polarized customer base is having a dramatic impact on equipment providers this year. It is a key factor in why big tractor and harvester sales can be down by as much as 40% and small tractor sales are still realizing year over year growth!

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The challenge for equipment providers is to best serve and market to the differing needs for each of these divergent customer segments. The larger farmer is looking for performance out of their equipment to cover maximum acres in a targeted farming window with minimized cost and increased precision.

Meanwhile, those in the lifestyle farmer segment want a basic range of functionality in a comfortable environment at minimized cost.

The larger farmer is looking for service and support characteristics of where he buys, while the lifestyle farmer is looking for more of a retail experience similar to how they make most other purchases. Providers with a footprint in both markets are feeling the pain of “doing the splits”! Appropriately scaled product and marketing strategies are needed now more than ever to effectively serve the large and small farm operation segments.

Both large and small customer segments present opportunities for growth for equipment providers. The cyclical nature of farming forces manufacturers and dealers to look for the segments of customers with the most opportunity in the current stage of the cycle, and to find ways to connect and stay connected with those customers.

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Context’s proficiencies and knowledge in the equipment industry range from deep technical know-how on equipment functionality and precision technology integration, to strategic marketing and management training experience, to operational excellence in supply chain and channel distribution. The Context arsenal includes industry leaders and innovators who have served globally as vice-presidents, directors, and field employees of major equipment companies. We have the experience and expertise to credibly provide pragmatic, actionable solutions that are especially needed during times like these to focus equipment providers on their diverging customer base and best position for growth through the next turn in the commodity cycle.

Provided by Context Partner, Mark Nelson; Context Senior Associate, Doug Griffin; and Context Senior Associate, Kevin Monk. For further information contact mark.nelson@contextnet.com.

Leading Strategic Change – A Key to Change: Deep Organizational Engagement & Involvement

We have the most educated workforce in human history. Younger generations of workers desire an opportunity to use their intellect to create and innovate. Many from the younger generations have grown up in more inclusive and team oriented environments, hence top down decision making and “marching orders” are less warmly received today than in the past. Our workforces are looking for greater degrees of leadership transparency and engagement. We are in a global transformation from command and control to self-organizing networked organizations. 1

Coupled with a changing workforce are our organizations’ cultures. What are cultures? The 1992 classic definition of culture is from Edgar Schein 2 “a pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and therefore, to be taught to new members as the correct way to perceive, think and feel in relations to those problems.”

We are experiencing three noteworthy and converging forces simultaneously:

  • A significant generational change between the Boomers exiting and a highly-educated work force
  • Cultures that recycle proven steps, methods and processes which have solved problems of the past
  • Highly-dynamic marketplaces that are in constant flux with new products and services needed to maintain the competitive edge.

How does senior leadership implement new strategies and not have their culture eat it for breakfast?  Our first tenet in Leading Strategic Change is “Involvement.” Younger members of today’s workforce wish to be engaged and involved. They want to be connected to:

  • the DECISIONS that affect their customers
  • the TEAMS with whom they work
  • the SUPPLIERS they resource
  • the IMPLICATIONS to their own work habits, preferences and lives.

Ultimately, these highly capable workers wish to contribute their knowledge, experiences and skills to new policies and procedures. They seek full investment in new ideas, concepts and strategies.  

So when does leadership decide and announce versus deeply engage, gather, decide and announce?  It depends. If a rapid competitive situation, supply chain or regulatory issue exists, then senior leadership many need to take the traditional top down approach. If the strategy has deep, long term implications, will create significant change and will result in culture change, we recommend taking a deeper approach of employee engagement. The Context Network has resources to help plan and facilitate employee engagement creating involvement that will make Leading Strategic Change more sustainable and successful.

If you have other “change topics” or questions, please send an email to Senior Associates, Raquel Lacey Nelson at raquel.laceynelson@contextnet.com and Monty Miller at monty.miller@contextnet.com and we will address in future articles.

References

1 The Economist, November 23, 2013, pg. 68

Schein, E. H. (1992). Organizational culture and leadership (2nd ed.). San Francisco: Jossey- Bass