Analysis of a Large On-Farm Grain Storage

1
Analysis of a LargeOn-Farm Grain Storage
Handling Facility

• By Jeffrey Berg, ARA, ASA, MRICS

2
Overview

• This analysis will demonstrate the steps taken,
  methods used, and information gleaned in the
  course of the analysis and comparable sale
  write-up of a large on-farm grain storage and
  handling facility.

3
Research the sale.

• Sources used
• county assessor
• county recorder
• internet searches
• local appraisers
• county plat book
• AgriData, Inc.

4
Information Obtained

• Sale date September 2006
• Sale price 900,000
• 6 acre building site w/improvements
• USDA payments of over 3,000,000 received from
  1995 to 2005.
• Other information buyer, seller, property type,
  document number, assessed value, parcel number,
  etc.

5
Confirming the sale.

• Seller interview
• Motivation of buyer seller.

6
Confirming the sale.

• Seller interview
• Motivation of buyer seller.
• The seller decided to exit farming after
  encountering problems with the USDA regarding
  payment limitation rules.
• Farm equipment auctioned in 12-06.
• HQ grain bin site and the HQ home sold in 9-06
  along with additional bin site and home.
• The buyer expanded operations into this area with
  this purchase.

7
Confirming the sale.

• Seller interview
• Motivation of buyer seller.
• Size of the farming operation.

8
Confirming the sale.

• Seller interview
• Motivation of buyer seller.
• Size of the farming operation.
• As operated by the seller, the farm HQ served an
  8,000 acre farming operation.
• Buyer was able to lease roughly 1,000 dry
  tillable land acres and 7,000 irrigated tillable
  acres.

9
Confirming the sale.

• Seller interview
• Motivation of buyer seller.
• Size of the farming operation.
• Tillable land cash rental agreement bin site
  sale.

10
Confirming the sale.

• Seller interview
• Tillable land cash rental agreement bin site
  sale.
• - The sale price reported in the courthouse was
  865,000slight difference due to accountants
  handling of part of sale. Actual sale price is
  900,000 (considered arms-length). Cash rental
  rates in area at time of sale were 100 per acre
  for dry tillable and 125 per acre for irrigated
  tillable (considered fair market).

11
Confirming the sale.

• Seller interview
• Motivation of buyer seller.
• Size of the farming operation.
• Tillable land cash rental agreement bin site
  sale.
• Sale of the house on-site.

12
Confirming the sale.

• Seller interview
• Motivation of buyer seller.
• Size of the farming operation.
• Tillable land cash rental agreement bin site
  sale.
• Sale of the house on-site.
• - Sale of the farm HQ house was negotiated at the
  same time as the on-farm grain storage facility
  but sold in a separate transaction to same buyer
  for 300,000.

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Inspection of the facility.

• Discussion with grain facility supplier/contractor
  .
• History of construction, facility age
• Farmer storage vs. commercial storage
• Augers vs. drag conveyors
• Concrete stem wall height
• Reclaim tunnels
• Drying capacity and aeration systems
• Fill reclaim capacity
• Receiving capacity

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Farmer vs. commercial storage
Centrifugal aeration fans
Vane axial aeration fan.
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Farmer vs. commercial storage
Reclaim gates/sumps reclaim paddle conveyor in
tunnel.
Incline unload screw augers
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Farmer vs. commercial storage
Concrete stem wall, reclaim tunnel, reclaim
paddle conveyor.
Reclaim tunnel (L), stem wall
17
Farmer vs. commercial storage
Stem wall paddle reclaim conveyor
Interior of a paddle or chain drag conveyor
18
Farmer vs. commercial storage
Screw conveyor
Bean ladder in a dry edible bean storage bin.
19
Inspection of the facility.
View of farm HQ house (r) purchased separately.
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Inspection of the facility.
Farm headquarters and bin site.
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Inspection of the facility.
Dwelling purchased separately.
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Inspection of the facility.

• Buildings and bins constructed from 1995 to 2000.
• Shop - 50x70x18, heated concrete floor, 24x70
  parts lean, 12x40 office lean, pole frame const,
  insulated, lined, colored steel exterior.
• South equip shed 60x104x17, pole frame,
  concrete floor, no insulation or heat, colored
  steel exterior.
• North equip shed 60x160x17, pole frame, gravel
  floor, no insulation or heat, colored steel
  exterior.

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Inspection of the facility.
50x70x18 heated shop office.
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Inspection of the facility.
South equipment shed 60x104x17.
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Inspection of the facility.
North equipment shed 60x160x17.
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Inspection of the facility.

• Bins
• (1) 30 (1) 33 (2) 36 diameter Sioux bins,
  65,000 bu total capacity, full floor aeration,
  filled by u-trough auger (filled from receiving
  leg), portable auger reclaim.
• (2) 48 diameter Sioux bins, 100,000 bu capacity
  each, full floor air, (2) centrifugal fans per
  bin, filled from legs, auger reclaim, short
  concrete stem walls, auger conveyors back to
  receiving pit.

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Inspection of the facility.
Larger bins note side draws.
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Inspection of the facility.

• Bins
• (2) 60 diameter 150,000 bu Brock bins, full
  floor aeration, auger unload, filled from legs,
  (2) centrifugal fans per bin, short concrete stem
  wall
• (1) 12,000 bu hopper bin used as wet holding
  bin for dryers
• (1) OH 5,000 bu Friesen hopper bin over driveway
  for load-out.
• Larger bins have sidedraws for truck loading.

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Inspection of the facility.
Bin facility row of smaller bins (L) larger
bins (R).
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Inspection of the facility.

• Grain Handling Equip
• Legs include a 10,000 bph rec. leg 7,000 bph
  leg (serves as wet dry leg for dryer).
• Valves are used to direct grain to bins.
• 10x10x150 tower supports legs spouting.
• Receiving pit is shallow w/10,000 bph drag
  conveyor to rec. leg.
• (2) SuperB dryers (1,000 1,200 bph) used for
  corn drying heat only.
• 12,000 gallon LPG tank inc. in drying system.
• Private water well and septic sewer system.
• Good farm storage but not commercial quality.

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Inspection of the facility.
Receiving pit area 5,000 bu OH bin and dryers
Receiving leg pit.
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Results of inspection.
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Cost Approach
Calculating RCNs for buildings, bins, grain
handling/drying equipment
35
Cost Approach
Abstracting depreciation rates from the
sale. (Total accrued deprecation rates.)
36
Cost Approach
Calculating physical depreciation in the
sale. (Individual causes of deprecation.)
37
Cost Approach
Economic obsolescence of 23 is indicated by this
sale.
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Sales Comparison Approach
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Income Approach
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Income Approach
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Conclusion

• Only appraise these special use facilities if
  youre willing to invest the time to become truly
  competent.
• This brief overview is not enough to make you
  competent in the appraisal of this type of
  facility.

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