Like most people, Frank Freeman doesn’t like to wait, and particularly, he doesn’t like to wait in line.

The Dumas, Ark., producer recognized the possibilities for expanding his profits and reducing the amount of time spent transporting rice and waiting in drier lines back in the 1970s when he began adding on-farm storage.

But Freeman isn’t alone. A growing number of rice producers are reporting they can reap greater price and harvest flexibility by adding on-farm storage to their operation.

Freeman started with an 18,000-bushel structure on the family farm in Dumas. Today, their storage capacity--centrally located on the farm--tops 90,000 bushels and is dedicated entirely to rice.

Freeman’s son, John, now manages the farm with Frank’s assistance. John credits his dad with the foresight to anticipate market trends and expand accordingly, both in land and storage holdings, so they could remain competitive in a tightening commodity.

"The state of the farm economy has reached a critical level," the younger Freeman says. "Even with good marketing, farmers are struggling. On-farm storage helps me keep more of my profits."

Reduced harvest pressures

Having their own storage, he says, eases a lot of harvest pressures and reduces their trucking and drying costs. Their farm is a 25-minute drive from the dryer. After adding maintenance, fuel costs and time waiting in line to unload, truck usefulness in the field drops accordingly. Since their storage is close, Freeman uses grain carts for most of the harvest except during longer runs when dump trucks are used.

They are able to unload and get back into the fields with clockwork efficiency--vitally important if inclement weather threatens the harvest. On-site storage, Freeman adds, also allows him the opportunity to delay selling until the market is more favorable.

"Usually seven out of ten years I can get a better price. The further away from harvest you sell, the more likely you are to get a better price. I usually wait until January or February, then pick a spike in the market to start selling one-third to one-half of my rice at a time."

Greater pricing flexibility

David Anderson, an agricultural economist with the Texas Agricultural Extension Service at Texas A&M, recently completed a study on strategies for different grain storage and found that growers with storage can hold the crop and take advantage of price increases.

"On-farm storage is part of a marketing strategy to help growers increase profits," Anderson says. "Essentially they become the merchandiser selling directly to the mill."

However, Anderson cautions the strategy can fluctuate depending on the market and quality issues. If a grower is dedicated to following rigorous management practices, he says there’s a greater probability of success.

"If quality slips when you get ready to sell, then the discounts will offset any profits you could have made, which is the main reason for adding storage," Anderson says.

Freeman agrees with Anderson’s warning. He rigorously follows the Arkansas Extension handbook on rice drying to maintain quality to increase his selling value.

"We almost always get milling yield premiums," he says. "I’m pleased with my quality, more due to the management of the bins and how we take care of the rice after it’s dried. My cost of drying rice is also much less than what I would pay at the local elevator."

Some misconceptions

Bill Reed, vice president of Riceland, a farmer-owned cooperative headquartered in Stuttgart, Ark., says the cooperative receives 90 percent of its rice from members at harvest and is responsible for maintaining crop quality during storage and marketing. Riceland also offers its marketing programs to growers with storage, but the grower assumes responsibility for quality.

"Riceland’s average drying charge is 30 cents a bushel," he says. "That compares with a cost of 58 cents per bushel for fixed and operating costs on a 40,000 bushel on-farm storage system, as estimated by the University of Arkansas in a 1999 study."

According to Kenneth Young, senior research associate from the Department of Agricultural Economics and Agribusiness at the University of Arkansas, "Estimates of on-farm rice drying and storage costs depend on the choice of handling equipment, system capacity and utilization and cost items included.

"Full economic costs include such items as interest on both short and long term capital use, depreciation and value of your own labor as well as direct out-of-pocket costs."

The 58-cents-per-bushel cost in the 1999 study, Young says, included six months of storage and insurance costs. Young and Eric Wailes, a professor from the same department, are currently developing an on-farm cost estimation model, available later this year, to help rice growers prepare their own estimates of costs applicable to their farm situation.

They say costs can vary from farm to farm depending on a wide variety of factors so they don’t like to be pinned down to a specific cost; however, they say the convenience and tax benefits of on-farm storage can be added to the list of benefits.

Reed says there is a misconception that all grain handlers make farmers wait in long lines. Riceland, he says, has worked hard during the past 10 years to reduce the waiting time to unload trucks. Their average wait time is 93 minutes.

Growers wanting to add storage can spread the cost and secure a favorable interest rate through a new federal program.

New FSA cost-share program

Tony Franco, agricultural program specialist with the U.S. Department of Agriculture’s Farm Service Agency in Little Rock, says Congress passed the Farm Storage Facility Loan Program to help farmers increase harvesting efficiency. The program also helps producers create pricing and hedging opportunities, provide adequate storage and handling of genetically modified grains and to counter a growing scarcity of storage.

"Commercial storage increased 79 percent in 1996 to 95 percent utilization in 1999," Franco says. "Fifteen states ran out of storage because we’re exporting less and producing more."

Once an application is accepted, the grower is assigned the current interest rate that the U.S. Treasury charges the USDA to borrow the money. For example, approvals granted in March received a 5.125-percent rate, and producers repay the loan in seven annual installments.

For questions or comments about this article, contact Rice Farming editor Vicky Boyd at vlboyd@worldnet.att.net or (209) 571-0414.