Renting out On-Farm Bin Storage

I get several inquiries each year from people who own grain drying and storage bins and want to know want to charge for rent. There is no standard price for renting grain facilities. It’s like setting the price of rent on a house. It depends on the location, the features, and the local market supply and demand.

From our UNL Land Surveys we are finding out that in about 60 percent of the farmland leases, the grain storage is a separate charge.  In the other cases, it is included in with the rent of the farmland for that tenant.

Bin rent on the farm would be loosely tied to storage charges at local commercial elevators. Commercial elevators charge a monthly storage fee per bushel of grain they hold for the client. There is also a handling fee to cover the cost of handling, wear on their equipment, and overhead.

On-farm grain storage usually operates under different rules than commercial elevators. A commercial elevator must have a warehousing permit so it can commingle grain from many owners in a bin or silo, whereas a private bin owner cannot commingle grain from multiple owners in the same bin. For this reason, rental agreements for on-farm grain storage usually are based on the capacity of the bin, instead of a monthly storage fee per bushel. It is assumed the tenant will tie up the bin from harvest to late summer (often Aug. 1). If the tenant moves the grain earlier, then no rebate is usually given since there is little chance a second tenant will want to use the bin after the initial tenant is finished using it that year.

To calculate the rent accurately, the owner should be compensated for their ‘dirti’ five.  These letters stand for depreciation, interest, repairs, taxes and insurance.  Building surveys that I’ve run across however indicate that for just storage, the rate ranges from 9 to 18 cents per bushel per year.  Storage with drying equipment would be 12 to 20 cents per bushel per year.  These are just ranges to start the discussion from.  Actual rent will be what the tenant and the landlord agree together.

If the tenant will be running the aeration system to dry their grain or aerating their grain to control grain temperature, some system should be worked out so the tenant pays for the electricity used to run the aeration fans and augers. This is relatively easy if the bin (or bin site) is on its own separate meter from the remainder of the farmstead, but it is not so easy if there is not a separate meter on the bin(s).

Finally, I would also suggest the bin owner draw up a written leasing contract with a clause stating the tenant is solely responsible to monitor and manage their grain in storage.

I need to give credit to co-worker and Emeriti Extension Educator, Tom Dorn, of Lancaster County for some of the material used in this week’s column.

For more information or assistance, please contact Allan Vyhnalek, Extension Educator, University of Nebraska-Lincoln, Extension in Platte County.  Phone: 402-563-4901 or e-mail avyhnalek2@unl.edu