A novice farmer's path to success through strategic grain storage expansion

An old Danish proverb states: “Ask advice only of your equals.” However, when Gregg Jensen asked some of his neighbors for their advice and opinions, he felt like he was anything but an equal because he was relatively new to row crop farming. One of those questions was, “If you could be my age again, what would you do differently?” Jensen says every one of them said build storage.

Consequently, one of his first endeavors when he took over his in-laws’ family farm near Wakonda, South Dakota, was to lay out a plan for grain storage and start building a grain handling system. Even though he had grown up on a hog farm near Viborg, South Dakota, he had very little experience with corn and soybeans other than using them for feed. However, in the process of adding storage, he discovered a lot more benefits from having adequate on-farm storage than simply the ability to play the markets.

Career Change

Jensen says he had never envisioned coming back to the farm and making farming a career, which meant he had a lot to learn. Unfortunately, he didn’t have the benefit of a mentor.

“When I went to college, my aspirations were to attend medical school,” he says. “I did all the testing, all the schooling, and was accepted before I realized it just wasn’t my cup of tea. I ended up transitioning from that to the agricultural world.”

Even then, it wasn’t to the farm. After graduation from the University of Sioux Falls, Jensen worked for a nearby pork producer followed by a stint with a drainage tile manufacturer, where he eventually became part of the corporate team.

“It was while working at those two operations that I came to realize that my life was in agriculture,” he says, reminiscing about helping his grandpa on his South Dakota farm. “However, my transition to the farm was a lot faster than I anticipated.”

Jensen explains that his father-in-law, Jim Holm, died of cancer in 2014, just five years after he and his wife, Holly, had married and moved to a house on her family’s farm.

“After he passed away, my mother-in-law, Sheila, had it lined up with a farming family to cash rent the property,” he adds. “During our meeting with the father and son, the dad asked Sheila if that was what she wanted, and she said, ‘No,’ she’d like to see the farm continue in the family. He then replied, ‘Well, Gregg wants to farm,’ and before I knew it, everything kind of fell into place.

“I often wish I would’ve had 10 or 15 more years of working with Jim so he could have groomed me for the job and passed on his wisdom,” Jensen adds. “It would’ve made life a lot easier for me. With the situation I was put in, I came to the realization that I had to ask questions that I didn’t have the answers to.”

Emphasis on Expansion

While some farmers suggested first putting in drainage tile or building a farm shop, all advised him to add more grain storage at some point. Jensen figured that when they all made the same suggestion, it must be a “no-brainer.”

Even though Holm Farms, as it’s now called, had 40,000 bushels of storage when Jensen took over the operation, he soon found he needed a lot more capacity, especially if he wanted to expand the operation.

“I realized very quickly that the day of finding help on the farm is getting harder and harder,” he explains. “So, the focus was on how I could gain more acres without more help. We were spending so much time hauling grain to town, sitting in line … and I had to get rid of that. In the meantime, harvest windows seem to keep getting smaller and smaller. When I took over, we couldn’t harvest any faster than two semis could handle. I had to improve efficiency from the field to the bin.”

Jensen says the plan for the whole grain-handling system began to take shape when he met Jerad Hutchens, president of Summit Contracting, the GSI dealer in Platte, South Dakota.

“When we sat down the first time, Jerad really focused on what I would need in the future and where I saw things going potentially,” Jensen says. “I learned rather quickly that even at that point, I was thinking too small. He really pushed me to build what he was seeing across the area for farmers of my size and a little bigger.” That was good advice as Holm Farms has more than doubled in size in the intervening years.

“One of the things we always stress is the importance of planning ahead, even if you don’t think you’ll need more bins or a dryer for a few more years,” Hutchens says.

“When we started working with Gregg, the first thing we did was create a CAD drawing of the site plan, which included room for expansion in an organized manner. Any plan we create also includes evaluation of the necessary infrastructure, which includes access to a fuel source for a dryer and sufficient power to support the overall system. I know it also takes up a lot of space to create a traffic pattern in and around the site, but failure to do so can lead to accidents and certainly reduced efficiency,” he adds, noting that year-around access to good roads is equally important. “The bottom line is always to plan for unexpected growth and the next generation.”

While Jensen has no idea what the future holds for his 12-year-old daughter, Stella, and 8-year-old son, James, he says he also wants the operation to be set up in a way that would allow either of them to easily take over. Hence, the expansion of his grain handling system:

• In 2015, Jensen started with a new 55,000-bushel bin.
• In 2017, he added an 80,000-bushel bin along with a 1,500-bushel pit running to a 10,000-bushel grain leg.
• In 2019, Jensen added a 60-foot, 100,000-bushel bin.
• In 2021, he added another 60-foot, 100,000-bushel bin.
• In 2022, he added 120,000 bushels of existing capacity on a farm he rented.

Jensen’s total current capacity equals 455,000 bushels. He no longer uses the 40,000 bushels of capacity he started with as those bins are removed from the grain-handling facilities.

“We have it worked into our cash flow that we will do a project with Jerad every two years and continuing for the foreseeable future,” he says. “Through the process, I haven’t just gained a contractor, I’ve gained a friend. He truly has my best interests all the time, every step of the way.”

ROI Every Year

Naturally, the whole plan depends on cash flow, Jensen says, but he’s already seen a return on investment (ROI) sooner than he expected. For example, he says the first bin he put up was approximately $1.40 per bushel. The second bin he added was about $1.70 per bushel, or about $380,000 for the bin, leg, and pit, and the price of steel has only gone up from there. He figures he has spent in total about $850,000 for equipment, dirt work, electrical work, and so on.

On the other side of the ledger, he says he is shooting for a 20¢-per-bushel ROI year in and year out versus hauling it to town at harvest. With a current capacity of 355,000 bushels on his own farm, that comes to around $67,000 per year that can be used to pay off the system or invest in new facilities. However, two years ago, it was a lot higher than that.

“I filled all the bins, but didn’t have it contracted,” he explains. “I had it sold on hedges, but didn’t have any hard cash sales. When we put the corn in, it was worth $4.00 to $4.25. When we took it out, I sold everything for over $8.00 cash hauled off the farm. So, I recovered half to three-quarters of my investment in that one year alone.”

While that may be way out of the norm, a six-year study by Iowa State University found that, on average, holding grain off the market until the following spring resulted in prices 5% to 10% higher than those available during harvest months. That didn’t take into account price advantages that may have been gained through the use of futures and options contracts. The study also found that most ethanol manufacturing plants prefer to buy grain throughout the year, rather than store large quantities on-site. Adequate grain storage capacity allows producers to take advantage of this market, which has also been the case on Holm Farms.

“The way I see it, the ROI in my grain leg and pit is often equal or greater,” he continues. “We can now run two trucks and a combine with a 12-row corn head in 200-plus-bushel corn, and the trucks beat the combine. Before, in that kind of corn with an eight-row head and having to go to town, we would get about 60% of the amount of corn out of the field in a day that we do now. I figure this saves me another semi and another person every year, if not two semis and another person going to town. Once you have a grain leg, you’ll never want to run an auger again. I hate augers. They’re just not as efficient, and that doesn’t even take into account the stress associated with moving and operating them.”

As for the future, Jensen says he is getting close to the amount of capacity he would like to have. Still, he wants to add a dryer as soon as possible so he doesn’t have to rely on air-drying alone to protect the grain.

“If I could have storage for half a million bushels with a dryer, I could manage that very well. We select our hybrids accordingly to match our drying conditions,” he concludes. “But once I put the corn dryer in, we’ll go after fuller maturity, longer-day corn for even better yield potential.”