October 18, 2000 | By: Laura Skillman

With the U.S. Department of Agriculture's announced changes in its on-farm storage program, Kentucky farmers may want to take a second look.

Earlier this month, the USDA announced its four-month-old Farm Storage Facility Loan program, which offers low-interest loans to farmers building grain storage. The program changes would be expanded to include structures designed to store silage. Also, the required down payment for loans was lowered from 25 percent to 15 percent.

Lowering the down payment may be an incentive for more farmers to consider the loan program, said Terry Moss, University of Kentucky Cooperative Extension Service farm management specialist in the Pennyrile area. Moss said he was aware of about half a dozen farmers in the Pennyrile area of western Kentucky who have applied for the loans and the down payment was not an issue for them.

Storage offers farmers better marketing flexibility by providing them with the resources to segregate crops and to decide when to sell.

UK agricultural economists say there are several factors to consider when determining whether to add on-farm storage.

An agricultural economics department publication notes that the loan provides an opportunity for producers that have already committed to improving their on-farm storage systems and need debt capital to complete the task. For others, it is prudent to investigate before making the decision.

Fiirst, farmers need to look at their production relative to what storage they have, Moss said. More on-farm storage offers farmers better efficiency by not having to truck the crop to commercial elevators during harvest.

A cost and returns analysis may help producers make the decision whether to apply for a loan. Producer marketing skills and the variability of commodity prices will affect the returns of on-farm grain storage investments.

Farmers are storing more grains because of low prices. They are holding onto their crops in hopes of securing better pricing in the future. For instance, more farmers are holding wheat this year because of the price issue. This crop is normally sold by this time and the bins ready for corn or soybeans, noted Moss.

Old crop stocks stored on and off-farm are at high levels in the state with corn up 4 percent above a year ago. Wheat estimates made by the Kentucky Agricultural Statistics Service show only off-farm stocks which are at a record level.

The USDA's Farm Service Agency estimates that facilities built under the program will increase on-farm capacity nationally by 36 million bushels. By early October, the USDA had received 2,347 applications.

The seven-year loans are for on-farm storage of such crops as wheat, rice, soybeans, and other oil seeds and whole grains such as corn, grain sorghum, oats, and barley.


Terry Moss, (270) 886-5281