Estimating the Cost of Drying Grain and Oilseeds2 weeks ago -
Early winter conditions this fall may make it necessary for harvested grains and oilseeds to be dried mechanically.
“Investing in a grain drying system requires careful long-term decision making because of the significant cost,” explains Dean Dyck, farm business management specialist at the Alberta Ag-Info Centre.
“Knowing the costs of on-farm drying is important for those evaluating the potential purchase and for those who already have a system in place to compare on-farm costs to commercial drying rates.”
The cost of drying will depend on the type and size of drying system, the amount of moisture to be removed, weather conditions during the drying period, and the operating and ownership costs. Operating costs include fuel, electricity, repairs and maintenance, labour, shrinkage and hauling.
“The largest component of grain drying cost is fuel – either propane or natural gas,” he adds. “The amount of fuel used will vary widely with the type of system, the type of grain or oilseed dried, the outside air temperature and the moisture removed.”
Dyck says that the cost of annual repair and maintenance or replacing components is usually low.
“It is suggested to use 1.5% of the investment cost of the drying system per 100 hours of use. Most drying systems use electricity to power fans and move grain. Multiply the horsepower of the electric motors by 0.75, then by the current electricity rate to calculate the cost per hour.”
The amount of labour required to operate a drying system will vary by the type of system.
“High temperature, fast drying systems will require frequent monitoring, while a slower system may not need to be checked as often. The labour cost per bushel can be estimated by dividing the typical farm labour wage rate per hour – usually about $20 per hour – by the number of bushels dried in an hour by the system.”
He adds that the cost of grain shrinkage during the drying and hauling process is often overlooked. “It can be calculated by using the Grain Shrinkage Calculator and multiplying the percentage of shrinkage by a future cash price.”
Ownership costs, including depreciation and the cost of investment, will vary depending on the size and investment in the drying system.
“The initial investment can include the purchase price of the drying unit, surge bins, plus any auxiliary equipment such as augers, wiring and concrete,” he says. “Depreciation on the dryer and auxiliary equipment can be calculated at the rate of 10% per year. If you have surge bins, depreciate them at 5% per year. The cost of investment should be the rate that could be earned on equity capital. A good measure is the Bank of Canada’s 5 to 10 year bond rate, which is currently at 2.5%. Divide these figures by the total estimated hours of use this year.”
“As a reference point,” he adds, “calculations done by the farm management specialists at the Ag-Info Centre suggest a range of 10 to 16 cents per bushel per percentage point drop in moisture. For example, drying canola from 17% to 9.5% will cost between $0.75 and $1.20 per bushel. There are many factors that go into the cost of drying grain, so doing your own calculations is highly recommended.”
Source: Alberta Ag