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October 20, 2014

Silo Bags Fill Void of Inadequate Grain Storage in Brazil

Brazil continues to run a deficit of storage space to store their expanding grain production. Estimates are that this deficit is at least 40 million tons. The federal government is trying to address this problem with a five-year program of subsidized loans for the construction of additional grain storage. This is a longer term program though, in the near term, Brazilian farmers are turning to the use of more silo bags to store their grain.

The long white plastic bags are becoming a common sight especially in central Brazil where the storage deficit is most acute. These temporary storage bags offer many advantages for the farmers. Without adequate storage, farmers are either forced to sell their grain at harvest when prices are generally at their lowest point or pay for expensive storage at the local grain elevator. The use of these bags allows the farmers to market their grain at a later date when prices may be higher. Some farmers estimate that they received 15% more for their grain just by delaying sales for several months.

Another big advantage of these bags is the savings on transportation costs. Without adequate on-farm storage, farmers must hire trucking companies to transport their grain to the local elevator during the harvest when freight rates are at their highest. Grain merchants are also paying these high freight costs to move grain to the ports so they must lower their offers to the farmers as a result. With these silo bags on site, farmers can avoid all these freight costs until after the harvest when freight costs decline. The transportation savings alone may be more than enough to cover the cost of the silo bags.

If used correctly, these silo bags can maintain the quality of the grain for 12-18 months. Farmers must be certain not to put high moisture grain in the bags because the bags cannot be aerated. It is recommended that the grain moisture be no more than 14% when it is put into the bags. The bags should be put on compacted soil where water does not stand and away from farm animals. The area around the bags should be kept as clean as possible in order to not attract rodents.

In Mato Grosso the use of silo bags started to gain force four years ago when approximately 1,000 bags were sold in the state. In 2014, an estimated 14,000 bags were sold in Mato Grosso. Each 60 meter bag cost approximately R$ 1,600 (approximately U.S. 700) and has the capacity to store 6,600 bushels of grain. The cost of the bag is therefore about US$ 0.10 a bushel not counting the equipment to fill and unload the bags. The equipment cost about R$ 100,000 or approximately US$ 45,000 and it should pay for itself in 4-5 years.

Even with the government program encouraging the construction of additional storage space, the situation may not improve any time soon because of the increase in grain production in Brazil is out pacing the construction of new storage units. Therefore, it is highly likely that the use of silo bags will continue to increase in Brazil.