Blame it on $7 corn and $16 beans, ethanol's explosion, high oil prices in the short term or the Russian grain embargo and reduction of government storage payments decades ago. Whatever the cause, country elevators have faced their share of turbulence off and on for years.

Record price volatility and the credit crunch are the latest bumps in the road for country elevators. But from the National Grain & Feed Association (NGFA) to state and regional grain and feed handling and processing groups, there's a sense that these important rural businesses are weathering the storm.

Pat Ptacek, executive vice president, Nebraska Grain & Feed Association, would like to see elevator pressure lifted. “We have about 140 co-op or country elevators as members,” he says. “That's probably 25% fewer than 10-12 years ago.”

Bob Zelenka, executive director, Minnesota Grain & Feed Association (MGFA), says that state's co-op/country elevators total 94 this year, compared to 124 in 1999 and 275 some 30 years ago.

A 2007 ILLINOIS STATE University study says the number of Illinois grain handling firms fell from 425 in 1994 to 250 in 2006. However, the study also showed that the storage capacity of elevators has more than doubled over those 12 years.

Jeff Adkisson, vice president, Grain & Feed Association of Illinois, also points out that its membership is down but storage capacity is increasing. “We continue to lose memberships due to mergers, consolidations and acquisitions,” he says. “Some facilities have sold to large- or medium-size farmers, as well as larger firms. But we can track back 20 years and our members still represent 90% of the state's grain storage space.”

Storage capacity is usually not a problem, except for grain gluts during the peak of harvest. But is there enough competition? There's a concern there's not. Richard Brock, president, Brock Associates and Corn & Soybean Digest marketing columnist, fears competing bids may be dropping too much for farmers looking for a better deal.

“Some country elevators either closed or merged due to margin requirements last year,” says Brock.

However, Darrel Good, University of Illinois agricultural economist, says that even with consolidation, “I really haven't heard many complaints about the competitiveness of the industry. There is still enough diversity and competition wanting the farmers' grain that bids are pretty competitive.”

Randy Gordon, NGFA vice president, government relations and communications, says that nationally, NGFA has “seen no evidence” of consolidation of country elevators hurting competition. “We've seen the emergence of larger, more regional grain companies — both farmer-owned cooperatives and privately owned firms — that tend to operate more facilities encompassing a wider geographic territory than existed previously,” he says.

“The grain and oilseed market continues to be highly competitive, with multiple buyers bidding for farmer grain. If anything, that market may be even more competitive now than five or 10 years ago.”

He credits that to multiple reasons: the entrance of new competition from biofuels, significant increases in commercial grain-handling and transportation efficiencies, the steady growth in demand for grain-based products and the availability of new, more innovative grain contracts designed to optimize farmer income from the market.

“Farmers simply have access to more risk-management tools now than ever before,” says Gordon.

Adkisson says access to Mississippi and Illinois river markets as well as the construction of several new shuttle train loaders helps maintain a competitive bid process for growers. “We're able to maintain a healthy cooperative and private sector and there's still an opportunity for farmers to get a good, fair bid,” he says.

NGFA has some 5,000 grain-handling facilities on its rolls owned by some 1,000 companies. “Most of the facilities are country elevators,” says Gordon. NGFA is actually seeing a membership growth due to its trade rules and arbitration system, which is incorporated into most grain and feed transactions.

ZELENKA SAYS THERE are continued cases of smaller elevators consolidating with larger grain companies or co-ops. Cargill, ADM, Scoular, Gavilon Grain, Bunge, DeBruce, CHS (Cenex Harvest States) and a host of regional grain companies and co-ops expand through acquiring the smaller entities.

“About 500 of 580 total licensed grain handling facilities operating in Minnesota are MGFA members,” he says. “Of the total number of country elevator facilities, approximately 300 are controlled by a local or a regional cooperative, such as CHS, a Fortune 500 entity.

“There are approximately 280 country elevator locations that are controlled by private firms like giants Cargill and ADM, as well as smaller companies or even families.”

Many of these larger companies offer growers numerous creative marketing programs. But there still may be fewer entities offering bids in some areas. Biofuel plants also helped squeeze out some country elevators with their own ability to out-bid them.

It was good for farmers, who received additional marketing opportunities. But when major ethanol companies like VeraSun sunk almost overnight, many growers were, and are still, stuck holding corn or beans they thought were sold at the higher prices.

Brock calls this syndrome one where “$6.50 corn was one of the worst things to happen to growers.” The high prices were there, he says, but elevators couldn't afford the margin requirements to cover $6-7/bu. corn sales from growers. And sales were only offered a month or two out by many elevators.

The run-up in prices put on added pressure. But Gordon says NGFA membership rolls didn't subside. “Certainly, some grain elevators operating on a thin balance sheet or where the ownership was looking to exit the business may have ceased or sold their operations,” he says.

“What was more common, we think, was that country elevators tried to manage their financial exposure calls by reducing or limiting the types and duration of forward pricing contracts they offered to producers, simply because of the margin requirements and the tighter availability of capital.”

Zelenka says a few elevators nearly closed. “That happened in a few instances but fortunately the run-up occurred prior to the credit crunch hitting ag lenders, so credit was available, with a few hitting their credit limit,” he says. “What did occur was a run-up in interest costs that most country elevators did not take into consideration when they prepared their 2008 budgets.

“The average Minnesota country elevator incurred 2008 interest costs of over $550,000, due primarily to the unprecedented and unexpected amount of margin calls,” he says.

In Nebraska, the run-up in prices and coinciding margin calls “definitely had an impact on the smaller private owner with under 1 million bushels of storage capacity,” says Ptacek. “There were a couple that went out of business due to high margin calls. But there was a collective sigh of relief when we had the steady decline in prices.

“We may see some of the fallout more this year than last if prices go too high. But some elevators are making profits and we as an association are gaining membership,” Ptacek says.

Zelenka notes that “too often, the local country elevator is taken for granted and overlooked for its value to the local area in terms of value-added market access, economic development, jobs and asa major taxpayer.”