The country grain elevator industry in Illinois has experienced
considerable consolidation and concentration over the last 12 years. A
survey by researchers at Illinois State University shows the number of firms
in the industry has declined while the storage capacity of grain elevators
has more than doubled, reflecting the “fewer and bigger” trend in American
agriculture.
The study, by researchers in Illinois State’s Department of Agriculture, compiled survey responses from 160 managers of country grain elevators across the state to track trends in the business structure of the elevators as well as the marketing tools they offer their farmer customers. The businesses surveyed are members of the Grain and Feed Association of Illinois. The results of the survey were compared to a similar study conducted by the University of Illinois in 1994.
Illinois State’s study shows that the number of firms in the industry has declined from 425 in 1994 to 250 in 2006, a decrease of 41%. Meanwhile, the storage capacity of elevators has more than doubled from an average of 2.16 million bushels to 4.6 million bushels over the past 12 years. The survey indicates that 65% of country elevators operate from multiple locations.
The survey also shows that the elevators’ customer base of grain producers and landlords has also changed dramatically as grain production takes place on fewer and larger farms. The elevator managers reported a decrease in the number of customers per firm, with an average customer base of 350 per elevator in 1994, compared to an average base of less than 300 in 2006.
Elevator managers were also asked about the types of marketing tools they offered and how those tools were utilized by customers. The survey results indicate only modest changes in the level and use of cash grain marketing tools offered by the industry. The majority of Illinois elevators offer customers the options of forward cash, delayed pricing, basis and hedge-to-arrive contracts. According to the survey results, nearly 70% of customers took advantage of forward cash contracts in 2006, while the other types of contracts attracted little use by grain producers.
Comparing the marketing contracts offered by elevator size does show significant differences in the variety of contracts offered. Survey results indicate that large elevators – with more than five million bushels capacity – were more likely to offer their customers such marketing contracts as delayed price, hedge-to-arrive, minimum price and premium offer.
“The survey results indicate that the business structure for country grain elevators in Illinois has changed dramatically in a rather short period of time,” said Rick Whitacre, a professor in Illinois State’s Department of Agriculture and lead researcher on the survey. “The decrease in the number of firms involved and the increase in the storage capacity of facilities mirror the larger trends of consolidation and concentration in American agriculture. What has not really changed since the 1994 survey is the manner in which farmers utilize the cash grain marketing tools offered by elevators.”
