On-farm storage upgrades completed in 2017 are playing their part in a central western New South Wales family's drought management strategy.
Andrew Freeth farms with his parents David and Sue and brother Marc on 5500 hectares at Collie, west of Gilgandra.
He says new and upgraded silos have acted as a "buffer" for their livestock, especially key Merino breeding stock, and form part of their drought management strategy.
Developed in 2016, the strategy addressed how the business would manage its grain and stock levels, and planting risk, if drought conditions arose again.
Like many Australian growers, the conditions they had planned for did occur again: 2017 saw their worst harvest in 10 years. In 2018 they planted just 20 per cent of their normal area, mostly to provide some ground cover. And with little rain in 2019, only forage - Sudan grass - has been planted.
Boosting storage had been of interest to Andrew before the recent drought.
As a GRDC-supported Nuffield Australia scholar with a background in grain marketing, Andrew was keen to investigate the role of storage in the grain supply chain and how it could improve marketing opportunities.
The Freeths, who typically crop wheat, chickpeas, barley and canola, retrofitted older storages with aeration - including controllers - and built six gas-tight 285-tonne cone-bottom silos. These all meet Australian Standard AS2628, which was developed to ensure a common definition of a gas-tight, sealable silo suitable for fumigation.
Andrew says it is important to make sure storage is right for the job.
"One of the things I tell people is that just putting up storage and putting grain in it doesn't mean you're going to make any more money out of it," he says.
"First of all, you must have all the basics right, like hygiene for example, to keep the grain in condition. But you've also got to get the marketing side right too. Otherwise, it is a waste of time."
Andrew says aeration is important for storing grain safely for long periods of time (beyond six months) and gas-tight storage allows effective use of phosphine to fumigate for insects as required.
When well-run, this storage can compete with bulk handlers on cost. In the feed grain sector, it can maintain an economic advantage in road delivery markets.
"For our new storage, we opted to build high-quality silos with the structural integrity to meet AS2628 over the working life of the silo," he says.
"Phosphine is a cost-effective tool at around 50 cents a tonne to manage pest incursions and the best-value option for growers to kill insects. The alternative is paying a fumigator to come in and sees costs rise to around $5/t per treatment."
Despite accessing silage stored in pits since the mid-1990s and buried oats from the past decade, the drought has gone beyond what most can prepare for. It has seen the Freeths purchase grain, pellets and hay to keep their sheep operation going.
When buying grain and fodder, Andrew is mindful of minimising the risk of bringing in unwanted weed seeds.
"To manage this, we have tried to limit the number of origins and where possible buy from trusted sources and feed out in containment or in defined areas," he says.
"The risk of bringing in resistant weeds or new weeds is very real. No strategy is perfect, but we have attempted where feasible to minimise risk."
Grain marketing flexibility
Andrew uses tools such as hedging to reduce risk and improve prices.
Hedging works by allowing a grain price to be locked in during the production cycle. This can begin from the time of planting until after the grain is in the bin.
To protect against the risk of prices falling leading up to harvest, futures contracts can be sold. This hedging allows predicted yield to be protected against possible price falls.
"Typically, we'll put grain in storage, hedge using futures or options on the Chicago market and then wait for basis (or local) opportunities to arise," Andrew says.
He says what is important, though, is having the right storage to access opportunities.
"Being able to keep the grain in condition in theory means we can sell at higher prices later in the season," he says.
"It also gives us better control of the situation, particularly for the feed grain market and in niche markets like chickpeas."
As an example, when the second tranche of on-farm storage was completed in 2017, the plan had been to store the farm's canola and market it.
"We had grown a GM variety and Cargill was happy to pay us to carry it until later in the year," Andrew says.
"It had higher oil content from the wet 2016 season, which requires a greater aeration capacity than what you can use for cereals, which is part of the reason we upgraded."
Location also forms part of their business strategy.
"We can run a road train to access northern feed markets in northern NSW and southern Queensland," Andrew says.
"Before we started feeding our own sheep the dry run has seen our feed grain heading north. I'd like to think it will rain and we'll be able to sell our Australian Prime Hard wheat to a miller, but it may go to our sheep or to the livestock market."
Key Nuffield lessons
Andrew expects the trend for Australian growers to increase on-farm storage capacity and improve the quality and sophistication of existing infrastructure to continue. He says it is driven by:
- harvest logistics and increased harvester capacities;
- rationalisation of the grains storage network;
- the increase in the area sown to pulse and speciality crops;
- increases in overall grain production; and
- greater willingness of growers to have more control of their grain path to market - following strong recent returns from selling grain directly rather than through the bulk-handler system.
He says those considering storage investment should establish clear objectives, consider future needs and plan with potential expansion in mind.
"A well-thought-out on-farm storage system, attention to good management and a marketing plan can add significant value and complement a grain production enterprise," Andrew says.
"When well-run, this storage can compete with bulk handlers on cost. In the feed grain sector, it can maintain an economic advantage in road delivery markets."
Andrew says there is no single formula for optimal storage.
"There is typically a trade-off when making storage investment decisions between build quality, cost, ease of management, segregation requirements and minimum use to generate sufficient return on investment," he says.
"Growers need to do their own research, including the use of grain storage professionals, to ensure any investment meets their needs."
Andrew says that although he had some light bulb moments on his 2015 Nuffield tour of the UK, US and Canada, the main lesson was the need to focus on the business side of his family operation.
For the moment, this means making decisions according to their drought management strategy.
"Our new storage gives us confidence to know that grain is there and stored well," Andrew says.
More information: Andrew Freeth, firstname.lastname@example.org, 0407 205 503
Useful resources: GRDC stored grain information hub.