Precision Grain Management - Cost Benefit Examples

Examples of Savings and Other Benefits of Precision Grain Management

Example 2 | Example 3 | Example 4

Example #1 - Seasonal Elevator

Summary: The old Standard Operating Procedure had the manager fumigate the wrong grain 4 out of 7 times and not fumigate the right grain 6 of 17 times. The scouting report recommmended all the right actions, would have cost less, and would have kept the grain from being damaged.

Details: A case study that allows us to compare the old Standard Operating Procedure approach with the advanced, data-based approach was created accidentally when a grain scouting report was not relayed to a grain manager. The scouting company sampled wheat in 24 bins in an elevator that is manned only part of the year. The manager was away during the scouting and was unaware of the scouting report.

When the manager returned, he began treating the grain based on his traditional approach. When the scouting company’s crew returned six weeks later to conduct routine re-sampling, 7 bins had been turned and fumigated, with the order of fumigation being based on grain temperature, warmest grain first. Judging from results of previous sampling, the tradition-based decisions were “correct” in three of the seven bins; that is, the grain that was turned and fumigated did, in fact, require fumigation. In two cases, grain containing too few insects to warrant fumigation was treated. In the case of two fumigated lots, the data did not provide conclusive indication of the validity of the traditional approach.

Of the 17 lots that had not been fumigated, the previous scouting report had recommended “no action until further sampling” in 10 bins. In three of these bins, insect densities had increased to the point that fumigation was now warranted and would be more effective than if it had been done prematurely. However, no damaged grain was produced in these bins. In fact, in all grain for which the scouting report recommended no action, no grain damage had occurred in six weeks. In the remainder (7) of the 17 untreated bins, the previous report had recommended immediate fumigation. In 6 of 7, insect populations exceeded acceptable levels and significant grain damage had occurred because fumigation had not been done when recommended. The cost of the Standard Operating Procedure approach can be estimated. If all the wheat had been turned and fumigated, 0.5¢/bu would have been wasted, on the average, because of unnecessary turning. In contrast, the cost of scouting was only 0.4¢/bu.

The cost of discounts for IDK depends on how skillfully the IDK and other damage resulting from the mistake could be “blended away”. It may have cost as much as 20¢/bu if it eliminated the possibility of marketing to a domestic flourmill. If the grain was to be sold into the export market anyway, there may have been no cost other than minor shrink. Even so, the disadvantages of the old approach include: a) the next fumigation will be no more accurate than the first; b) the manager does not learn from mistakes because no information is available to provide guidance; and c) some wheat had to be stored into the next season because the IDK count was too high to move, so valuable space was taken up by damaged carry-over grain during the subsequent wheat harvest.

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Example #2 - Large Country House

Summary: The precision management approach cost at least $1,000 less than the standard approach and caught a missed fumigation that would have produced damaged wheat.

Details: This elevator and flat store have capacity for one million bushels. Part of the capacity is dedicated to supplying a small, on-site feedmill. The manager began moving wheat from the upright bins to the flat store even before harvest was over in mid-July, for the fall crops require about 500,000 bu of bin space. Filling the flat required several weeks.

Scouting showed which upright bins required fumigation prior to and during fall harvest, avoiding the need to turn and fumigate large numbers of bins. 350,000bu of wheat in which scouting showed no detectible insects were marketed before mid-October without fumigation at a savings of $1,800.

Infestation in a few bins had to be addressed before the end of fall harvest, but nearly 200,000 bu were held until cold weather without turning. This ensured that the wheat, most of which was stored in bins without aeration, would cool enough during turning and fumigation to last into the summer without further treatment. Meanwhile, wheat in the flat store became infested rapidly. If this wheat had not been fumigated until the traditional time in this part of Kansas, significant grain damage would have occurred. Repeat scouting showed that the fumigation was not successful in one end of the building. The managers had third-party data to show the fumigators, and the fumigation was repeated without additional cost to management.

The cost of scouting was $7,400 compared to savings of at least $8,400. Additional benefits included: a) peace of mind for the first-time manager and his first-time elevator operator, b) frequent consultation and guidance to facilitate learning, and c) detailed protein information with which to capture premiums in the mill market.

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Example #3 - Semi-Terminal Elevator

Summary: The precision management approach eliminated discounts, cost about $4,000 less, and provided additional risk control.

Details: An elevator with a usable capacity of about 0.75 million bushels is used by a multi-site coop mostly to supply a small flour mill. It was filled with wheat by the end of August and remained full until the end of October. Periodic scouting showed a slow insect build-up but no grain at high risk of grain damage. This was fortunate, given that there were no empty bins in which to turn and fumigate. By November 1 st, scouting showed a few bins at high risk for grain damage. Finally, space was made available. With the benefit of scouting reports, the most critical wheat was treated first.

The previous year, no such information had been available, and damage-related discounts had accumulated to more than $16,000. The annual scouting cost about $12,000, whereas savings in turning costs and discounts are estimated at $20,000. Additional benefits of precision grain management include: a) flexibility to move the manager to nearby locations during busy times in the fall with minimum risk, b) high-risk wheat was treated first, c) low-risk wheat waited until the air was cold enough to ensure good cooling during turning and fumigation, avoiding a second turn in the spring.

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Example #4 - GEAPS Exchange 2003 Educational Session

This example, “New Tools for Maintaining Stored Grain Quality” was presented by Steve Morris of the Andale Cooperative at the 2003 GEAPS Exchange in Seattle (www.geaps.com).