But beware! A multitude of dryers exist, each as good as the next, and it's not always easy to navigate through all these options. Given that this is a major, multi-year investment, it's best to carry out a thorough financial exercise before embarking on such a project.
Selection criteria
Here are 5 financial criteria to help you decide which type of equipment is best for your business. And yes! The budget is the mother of all things!
The sum of the economic advantages will enable you to achieve a realistic and viable return on investment for this type of project. The main savings will be in :
- reduced drying and storage costs
- improved quality and value of your harvest
- a better selling price
- securing your harvest by harvesting at the “right-time”
- the volume of grain to be handled
Reducing drying and storage costs
Generally speaking, drying and storage costs are relatively similar from one grain center to another. The table below summarizes the costs, with an average cost of $45/Mt for drying a ton of corn at 25%, storage for 3 months and entry and exit fees of $6/Mt. Note that you will be credited with the entry and exit fees if you sell your grain to the grain center. Your reference cost will therefore be between $39 and $45/Mt. For soybeans and cereals, drying costs are generally between $15 and $20/Mt.
| Comparative - Grain Center | ||
|---|---|---|
| Corn moisture - Dry (%) | 14,50 | % |
| Corn moisture - Wet (%) | 25,00 | % |
| Shrinkage (%) | 1,25 | % |
| Decrease | 0,87719 | |
| Shrink factor (Decrease + shrinkage) (%) | 1,1240 | |
| Tonne stored (Mt) | 0,89 | Mt |
| Drying cost ($/Mt) | 1,2464 | $/% |
| Storage costs ($/Mt) | 3 | $/Mt |
| Storage time (months) | 3 | months |
| Entry fee | 3 | $/Mt |
| Exit fee | 3 | $/Mt |
| Total | 45,17 | $/Mt |
So if you have a project and your cost of production is $39/Mt, does it make sense to add a job in the fall? Need more manpower? Add a tax burden to your business? Take on additional risk on the farm?
A business case is more than necessary if you want to make the most of your investment. For some businesses, the savings can be substantial. Particularly when you can have a cost price of $25/Mt, saving $20/Mt (45 - 25) on a volume of 5,000 Mt. The savings of $100,000 over 20-30 years will quickly justify the decision to invest in such a project.
A good advice: do your homework first! There's a long list of criteria to check:
Drying cost = Energy (electricity + gas) + labor + decrease Costs (fixed, variable) = Interest + maintenance Discount = Grade + weight (kg/hl) + CCFM + Moisture + Damage (%) + Heated (%) Savings/Gains = Moisture mix + reclassification (Grade) + weight (kg/hl)
Many criteria need to be taken into account to correctly measure the possible financial gains, but also the additional costs and risks to be anticipated. These include labor costs, the risk of quality loss, and the risk of not drying grain properly.
Additional cost and risk of loss:
- Over-drying leads to a loss in the weight of grain sold
- Corn moisture content: 14.5% vs 13.5% => 1% at $250/Mt = $2.5/Mt
- If you damage your grain and downgrade it, you'll lose a lot.
- Loss of quality: $5/Mt
- Don't forget to calculate the labor time (receiving, drying, handling, shipping, maintenance, etc.) required for your operations! These days, no one works for free.
- Labor: about $4 to $10/Mt
Why such a comprehensive analysis? Because more often than not, it's still more advantageous to deliver your grain directly to the grain center than to build your own. Particularly if your volume is low, you're short on manpower, you have little knowledge of drying and storage, or you're not familiar with the grain market.
Read the full version of the blog on our site to find out about the other 4 criteria, and learn more about the types of dryers you should consider for your business needs.
