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FacebookGrain elevators most visible icons of rural life
Friday, June 29, 2007
They call them "bees wings" — the pink, flaky particles that break off corn kernels and shower small towns when grain elevators dry and handle the harvest.
Admittedly, bees wings have a reputation for irking locals.
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But grain elevators are also known as the most visible icons of rural and small-town life, sometimes towering more than 100 feet over towns or fields. Often, they are the first landmark people spot when returning to their hometown.
Still, they are landmarks in limbo.
Many are closing, especially those which have lost access to railroads. Some, particularly in suburban areas, are adding drive-throughs stocked with items for those seeking a country existence.
Others are being bought up. The Ohio Agribusiness Association's membership counts 290 companies as members, a decline of 30 percent to 40 percent in the past two decades, said the association's Brian Peach. (Virtually all association members are grain elevators.)
Industry observers say some elevators have been slow to evolve so they remain relevant to farmers.
"Many of them aren't doing a lot, and that's a problem," said Bob Linkhorn, president of Limaco in Urbana, which works with dozens of grain elevators in Ohio and Indiana.
The 13-county Dayton region still has 92 state-licensed grain handling locations. They range from Cargill's hulking corn and soybean terminals in Dayton and Sidney, to smaller, family-owned independents. Many are farmer-owned cooperatives with multiple locations: Champaign Landmark, Harvest Land Co-Op, Mercer Landmark and Southwest Landmark among them.
Bypassed by farmers
As farming became more efficient during the latter half of the 20th century, some farmers began putting up their own grain bins in which to store their harvest, bypassing their local elevator.
"As the farmers get bigger and bigger, they need the country elevators less and less," said Gary Gregg of Barnets, Inc. near Camden in Preble County.
He estimated his family's 40-year-old business handled 2 million bushels of crops in 1985, but usually less than 1 million bushels per year now.
Barnets has expanded into the trucking business to compensate for the loss in grain trade, he said. Most of the company's 50 employees are truck drivers; only four work at the elevator.
Livestock production, once scattered uniformly throughout the Miami Valley, now has become more concentrated in some areas and virtually absent in others.
As a result, horses now account for nearly half of the feed business at Brubaker Grain & Chemical's Farmersville location. A generation ago, the feed business came mostly from dairy, hog and beef herds.
Darrell Brubaker, whose family business has locations in West Alexandria, Collinsville and Farmersville, said 10 percent of grain was shipped by semi five years ago; most was still shipped in trucks with hopper beds. But he said 80 percent of grain was shipped by semi last fall.
For many elevators, unloading those huge loads quickly is a challenge.
"The speed of harvest is a lot quicker, and maybe our industry has not kept up with the farmer," Linkhorn said.
Taxes and ethanol
Some independent grain handlers say Ohio has stacked the deck against them with the recent enactment of the commercial activity tax. The commercial activity tax, which taxes receipts above $1 million at 0.26 percent, is based on gross receipts, not profit. That penalizes some grain elevators, which deal in large volumes of grain but have profit margins in the single digits. Those profit margins don't increase when prices rise, but taxes do.
Bob Rudy, the fourth generation to run Rudy Inc. since its founding in Covington in 1904, said the tax puts smaller grain elevators such as his at a disadvantage. That's because large grain terminals that sell the bulk of their grain outside Ohio do not pay the CAT on exports. Exports, whether to Indiana or to India, do not fall under that tax. Farmers cooperatives also don't pay the tax.
"The state of Ohio is probably the biggest challenge we have as an independent businessman," Rudy said.
In Ohio, the advent of ethanol production from corn is "without a doubt" the most significant short-term challenge facing grain elevators, particularly those north, east and west of Dayton, Linkhorn said.
For Gregg's rural Preble County elevator, an ethanol plant under construction in neighboring Darke County will mean more competition, cutting into already slim profit margins, he said.
"They're going to go out and compete for additional bushels from all of our customer base," said Rudy of the grain elevator in Covington. But he said there could be benefits. "When (the ethanol plants) are in dire need of grain, we may have an opportunity to sell it at better prices than normal."
"There are going to be winners and losers," Linkhorn said.
Beyond agriculture
Some grain elevators have gone beyond agriculture to supplement their income. Sprint Nextel, for example, has paid grain elevators since 1998 for the right to place antennas atop their grain silos, compensating them $500 to $2,000 per month, said John Buchert, business analysis manager. Buchert said he didn't know how many grain elevators had antennas, but said the practice is common.
Some grain businesses are adding value to the crops they handle.
Mercer Landmark, a diversified grain elevator cooperative with $95.2 million in sales in 2006 and 170 employees at 14 locations in Mercer, Darke and Van Wert counties, is building a soybean extrusion plant north of Celina. The $3 million plant, scheduled to open this summer, will process both conventional soybeans and a new Monsanto soybean with less saturated and trans fat. Mercer Landmark has 18,000 acres of the specialty soybeans, called Vistive, under contract. The plant will produce soybean meal for beef and dairy cattle, and food-grade soybean oil for frying.
Mercer Landmark, believed to be the first commercial fertilizer dealer in the state to distribute manure, also is working with academic researchers to devise a way to help reduce the odor from liquid manure by using molasses, Fry said.
"If you're going to survive, you've got to evolve," said Mike Fry, Mercer Landmark's president and CEO.
Contact this reporter at (937) 225-7457 or bsutherly@DaytonDailyNews.com. Sutherly's family owns a grain elevator in New Carlisle.
