I don't know how many farms I have visited in Brazil, but it's safe to say few of them have on-farm storage. When they do, it's usually horizontal storage, which makes segregation of biotech and non-biotech, for example, impossible. One doesn't see much vertical storage, but the sector is growing.

Brazil is worried about its storage capacity. The government talks constantly about helping small farms, but soybeans are one of the biggest foreign currency-earners here. So the more soybean farmers make, the more the government makes. But one big problem is the purchase of on-farm storage.

Spending for on-farm storage dropped by 41% from 2004 to 2005, according to news reports, likely due to the severe drop in the value of the dollar and in soybean prices. Brazil's main agricultural lender, the Banco do Brasil, gave about $12 million (U.S.) in loans for on-farm storage in 2004 at subsidized interest rates of about 8.75% annually in a country where credit card rates are more than 45% per year.

One of the big problems farmers face here is the inability to hedge. “On-farm storage is a win-win situation for everybody,” says Othon d'Eça Cals de Abreu, president of Kepler-Weber, a big silo production company.

Many producers store their beans at Cargill or Bunge or ADM, or whoever is buying, says Abreu. But if they could keep their storage on the farm they would gain an advantage, being able to hold onto their product until prices are right. In addition, he says farmers can get a better price by holding their own beans, given discounts for moisture at harvest and other factors.

Kepler-Weber, a Brazilian company that sells silos and port equipment worldwide, says that even if producers in Brazil can store some of their harvest with the first-purchaser crushers, even they don't have the capacity to store all the oilseeds and grains Brazilian farmers are harvesting. As a result, they are moving storage facilities at a rate that means farmers have to sign onto a waiting list. The average cost of such a facility is around $100,000 (U.S.), says Abreu.

In a country where a lot of soybeans are held on a tarp in the field because there are just not enough silos, on-farm storage would seem to make sense. And, as one banker told me, “Storing beans on a truck is not the most economical thing you can do.”

Aloízio Alvez de Freitas, who farms nearly 30,000 acres of soybeans, 7,500 acres of corn and 2,500 acres of sorghum in the state of São Paulo, says he decided to install on-farm storage because of “better ability to negotiate, more independently, and also to take advantage of the grain residues for feeding confined animals.” He adds that having on-farm storage gives him greater flexibility at harvest in terms of hiring trucks to move the product.

Before buying an on-farm storage system, de Freitas stored his harvest at co-ops and at the first points-of-purchase of the big multinationals.

With continued growth of on-farm storage, look for Brazilian farmers to increase their ability to play futures and make more money.