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1_More room in the bin?

BRECKENRIDGE, Minn. - A new set of grain tanks at Minn-Kota Ag Products Inc. on the east side of Breckenridge, Minn., is emblematic of what many ag watchers perceive is a big expansion in grain storage in the region in anticipation of the 2007 co...

BRECKENRIDGE, Minn. - A new set of grain tanks at Minn-Kota Ag Products Inc. on the east side of Breckenridge, Minn., is emblematic of what many ag watchers perceive is a big expansion in grain storage in the region in anticipation of the 2007 corn crop.

While aggregate numbers in commer cial and on-farm expansion are hard to come by, individual projects such as Minn-Kota's are obvious in their communities.

Jody Schuler, president of the long-standing company, puts it succinctly: "With more corn acres, we're going to see more bushels, and there's going to be a need for more storage."

Like other elevators in the region, Minn-Kota has been piling more grain in temporary storage in the past couple of the years - on the ground and in bunkers. Last year, it put 700,000 bushels on the ground.

For the past two years, the company has been planning a change, and this year, it happened. Some of the company's old storage was inefficient and inappropriate for today's needs.

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In January, it moved the elevator's office to the old Sigco Research Inc. headquarters building that it had owned but leased out. In February, it took down the old office grain elevator that held about 45,000 bushels, plus an old wood annex that was built in 1950 and held another 80,000 bushels. A couple of fairly new steel tanks next to it were removed and moved to a Minn-Kota facility in Barney, N.D.

"We replaced it all with two big steel tanks that (together) will hold about 700,000 bushels," Schuler says, noting the work is being done by Gateway Building. "All together, were adding about 800,000 bushels of storage and taking down 200,000. We'll still have to put some stuff on the ground, but with additional storage, we'll keep more in-house."

Schuler says the new storage will come in handy this year, despite excessive moisture that has hurt wheat and soybean crops.

"The corn is doing pretty good," Schuler says, despite planting delays. Row crops have recovered nicely in the past two weeks, although some of the soybeans were planted in mid- to late June in drowned-out wheat acres.

Schuler says it's his impression that there's "just a lot of storage going up." Other projects this summer have been in Fairmount, N.D.; Brushville, Minn.; and LaMoure, N.D.

A lot of it is corn-related.

Sue Richter, director of the licensing division for the North Dakota Public Service Commission in Bismarck, says much of the construction won't be added up immediately. The PSC licensing process doesn't have to happen until the facility is ready for use. She's been contacted by a couple of elevators about how the process works, but most already know.

"We've seen some minor requests for capacity changes," Richter says. "I think we'll see the bulk now as the space is being finished and before it's ready for harvest.

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"Last year, a lot of grain was handled by ground storage," Richter says.

From Sept. 1, 2006, through Nov. 3, 2006, the PSC had 49 requests for increased capacity - 31 were for ground storage and 18 were for internal storage. The requests totaled 12.3 million bushels, of which

9 million bushels were for ground storage. The state has about 291 million bushels of elevator-controlled storage, of which some is leased from farmers.

Expansion is happening all over, and ethanol-related motives never are far away.

Ethanol megashifts

Bob Zelenka, executive director for the Farmers Elevator Association of Minnesota, says he sees a lot of commercial and on-farm storage going up, especially with the shift from soybeans and wheat to corn, which is three times the volume.

Historically, about three-quarters of the storage is on-farm, while Zelenka typically focuses more on the commercial, elevator storage.

"The temporary bunkers we see out there are going to be full, and we'll see some ground storage," Zelenka says.

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Much of the expanded storage probably will be in temporary bunkers.

"It may not strain the transportation system as much in the past. We have

200 million bushels of corn use going to ethanol" in Minnesota, Zelenka says.

In the northern Red River Valley, shuttle loaders have expanded significantly in the past year. That's related more to soybean and wheat marketing, but it's also influenced by corn.

Bob Staehnke, general manager of Mid-Valley Grain Co-op in Crookston, Minn., says his company put in a new shuttle loading facility for 110-car trains along U.S. Highway 75, where it purchased an Anheuser-Busch elevator. Mid-Valley installed two 365,000-bushel storage facilities.

The idea was to stay competitive on wheat and soybeans, Staehnke says.

"Right now, I'd like to have another 500,000-bushel bin because of the corn," he says.

That added storage project probably will wait until 2008, although funds have now been approved through CHS. Meanwhile, other elevators in Erskine and Argyle, Minn., also have added capacity and shuttle loading, Staehnke says.

Zelenka says that while ethanol seems to be a big driver in a period of "unprecedented growth," there still will be corn exported, though, because some foreign purchasers have limited choices. About three-quarters of the world export trade in corn is from the U.S.

During the past 25 years, the elevator system has transitioned from being a storage-and-handling business to more of a handling-focused business. Farmers have taken more control.

Zelenka notes that on-farm storage doesn't have to be licensed and bonded, unless the farmer is handling grain for others. He's seen quite a dramatic increase in on-farm storage in southern Minnesota. Some of these facilities have 100,000-bushel bins and sophisticated grain legs.

"When you look at the size of some of the facilities going up, you can be concerned from a safety perspective," Zelenka says, noting issues with moving parts and bin and tank entry procedures. "At the grain elevator, we have OSHA regulations - a lot of regulations that control the operations of equipment, legs and conveyors. We have procedures for entering bins and training for employees."

Zelenka says it would be good to see the general farm organizations step up their efforts with on-farm bin safety, in keeping with a substantial growth in capacity.

Carl Anderson, executive director of the South Dakota Grain and Feed Association based in Aberdeen, S.D., says the ethanol push might create new demand for smaller, older elevators with limited access or equipment on a railroad.

"This ethanol business is going to be a truck market," he says.

Mike Nickolas is grain marketing manager for North Central Farmers Elevator in Ipswich, S.D., with facilities in 11 towns in north-central South Dakota. He says this year's need for new storage is tempered by last year's drought and a capacity of empty on-farm storage.

"There is some storage being built, but if we'd had a crop last year, we would have seen more storage built this year," Nickolas says.

Last year, North Central Farmers built a 2.5 million bushel facility in Bowdle, S.D. With the drought, however, it "wasn't the ideal time" to build the facility, he acknowledges. This year, the company is focusing on making some of its temporary storage to more long term - covering piles with air systems.

Roger Krueger is grain division director for South Dakota Wheat Growers, based in Aberdeen. SDWG, a cooperatively owned grain and agronomy input business, has 20 elevators in South Dakota and majority interest in a limited liability company shuttle loader based in Oakes, N.D.

The storage and handling infrastructure - both commercial and on-farm - is "going to be playing catch-up," he says.

SDWG currently is under an aggressive expansion pace. This year, the company is adding 12 million bushels of storage space in the state - increasing from the current 40 million bushels to about

50 million bushels. The company is using a combination of types - large-diameter steel bins, flat barn-type structures and concrete with asphalt floors.

"Our company is viewing ethanol demand as a long-term business reality," Krueger says.

'Green-field' and off-railKrueger notes that his elevator is doing a new thing this year.

It has added two new, "green field," off-rail grain elevators to handle corn - one in Hecla, S.D. (3.8 million bushels) and the other in Cresbard, S.D. (3.2 million bushels), southwest of Aberdeen.

Krueger says it sounds strange, but that kind of elevator siting probably never has been done before. The two projects are under construction for about $18 million and will be completed this fall. The facilities are planned to handle corn only.

"They'll function like a high-speed farm bin," Krueger says. "We're going to fill them in a three- to four-week period in the fall, and then in the following summer, we'll empty them over a six-week period," he says. "We're planning to operate them seasonally."

The premise is that you're trying to build to save farmers travel time and expense at harvest, he says. The facilities will both have high-speed dump pits, high-speed dryers and offices and scales.

The Hecla facility is about halfway between SDWG's Aberdeen (Grebner) shuttle loader and the company's Oakes partnership.

"It saves our customer-owners an hourlong trip to the elevator and back. It lets them get their truck back in the field," he says.

The Aberdeen area has several ethanol influences, including plants in Groton, Aberdeen and another plant west of Aberdeen. By dumping at the off-rail sites, the SDWG marketers can have the option of going straight to an ethanol plant or moving to their own shuttle sites.

Dunnley Mattke, president of Hogenson Construction Co. of West Fargo, N.D., says his company's activity is dramatically accelerated. Hogenson is a general contractor, a design-build company that specializes in grain storage and grain process handling facilities. It has built several rail shuttle loaders in the past 10 to 15 years.

"A lot of storage is being put up for the ethanol plants, and it's requiring more in the way of planning, which some of the other commercial industries have not had to deal with for many years," Mattke says.

Hogenson, which bids on projects nationwide, has done the bulk of its work east of the Rockies. His company has tripled its crews and employment in the past three years, but still is stepping lively to meet the demand, which he acknowledges is heavily influenced by the ethanol boom.

"We went into this year pretty well filled up for the first three quarters of the year," Mattke says. "Right now, we're booking build slots that are out six months from now. I'd say we've got about a third of our sales for next year already booked, which used to never happen. The co-ops and other commercial industries would wait to build and come to you wanting the buildings the next day. That's been a shock to some of them this year because we did have to turn down a few of these folks."

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