Why On-Farm Storage is Important to Both Farmers and Buyers

By David Perry

The mid-nineteenth century saw a revolution in transportation — and advances in railways and steamships allowed for the movement of massive amounts of grain from rural farms to urban centers. In the 1850s alone, the amount of farmland in the United States grew by one hundred million acres, and over half of these acres were in just seven Midwestern states[1]. Consumers increasingly purchased food grown hundreds or thousands of miles from where they lived. This trend continued into the twentieth century, with truck transport gaining in efficiency. This was hinged on the development of the Interstate Highway System, a public works project authorized by the Federal Aid Highway Act of 1956. Farmers were able to truck their harvests to elevators — storage facilities that would buy their grain.

The commodity grain market continues to leverage this elevator system. Farmers sell their crops at elevators, where they receive payment based on the quantity they produce (the market price per bushel). From there, the grain is sent by truck, rail, or barge to wholesalers, local millers, brewers, etc., but only after being blended with grain from other farms to meet generic commodity quality standards. At this point, the grain’s identity is lost; it is no longer possible to trace it back to the farm on which it was grown, and thus to describe the agronomic practices used. Since the elevator system pays only for quantity, there is no incentive for farmers to adopt sustainable agronomic practices or invest in producing a higher quality crop. Quantity is the bottom line. The result is an overall decrease in both the quality and environmental sustainability of our food supply.

While the elevator system was the most efficient way of moving grain a hundred years ago, logistics have come a long way since then. We now have companies like Wal-Mart, FedEx, and Amazon that have built entire businesses based on leveraging new logistics capabilities. Increasingly efficient vehicles with advanced routing capabilities are making their way onto the market. Grain bagging systems are allowing for low-cost storage and monitoring of harvests on the farm. New sensing and tracking technologies are allowing us to test and monitor quality and location, and new software technologies like blockchain are allowing us to preserve identity from the farm all the way to the table. Indigo is leveraging these technologies to create a specialty market for grains. This market is premised on identity preservation and direct delivery from farmer to buyer. For this, on-farm storage is critical. Farmers can keep their harvests on the fields where they were grown, testing grain quality before delivering to the highest value buyer.

Over the past decade, farmers have increased their investment in on-farm storage solutions. These solutions, whether in the form of steel grain bins or grain bags, have allowed for farmers to wait for the best prices, reduce transportation costs, and avoid lines at elevators during the busy harvest season. In many cases, on-farm storage solutions also improve harvest efficiency — bagging can take less time and fewer people than loading grain onto a truck and driving back and forth to (often far-off) elevators. At Indigo, we are launching an on-farm storage program for US farmers. Through this program, we work with farmers to store and monitor harvested grain on site. We finance grain bagging systems at no upfront cost or lease existing systems (whether bags or bins) to store grain produced with Indigo. After harvest, we handle pick-up and transport directly to buyers.

Through this program, Indigo keeps a virtual inventory of available grain. On each farm, we know the quantity and quality of the grain produced. We also know who produced it, where, and what agronomic practices were used during the growing season. Identity-preserved grain is held in place until we bring it to the highest value buyer, just when they want it.

We have built this system to promote the interests of growers, buyers, and end-consumers. For growers, benefits include improved harvest efficiency, reduced transport cost, and basis improvement, on top of the premium per bushel that Indigo guarantees to those producing with us. Identity preservation enables this premium, as it ensures that growers’ efforts to differentiate their crop are rewarded by buyers looking for certain specifications. For buyers, this system leads to a market of specialty grains of known quantity and quality. These grains are differentiated by qualities such as high protein content, reduced nitrogen application, and lower carbon footprint. For consumers, this sort of specialization provides access to the kinds of foods that are important to them, whether they are looking for nutrition, flavor, or cleaner means of production.

Premised on identity preservation, the marketplace that we are building is one where buyers of premium crops are directly connected with the farmers who grow them. We believe that this system will fundamentally align agricultural practices with consumer preferences, laying the groundwork for a healthier, more sustainable food system.

 

[1] https://www.jtlu.org/index.php/jtlu/article/view/188