The COVID-19 pandemic brought extreme volatility to the food and commodities markets. Consumers hoarded meats, milk, bread and other essentials and farmers were uncertain how lockdowns and other government orders would affect their production levels.
Industries that depend on silo and bin storage have monitored these changes closely. Grain storage operators adjust storage dependent on demand from food producers and escalating costs in building materials increases the capital expenditures required to build and maintain new storage structures.
Effective planning following COVID-19 and resulting market fluctuations requires asking important questions like, “What is the silo and bin storage outlook for 2021 and beyond?”
Here is a brief overview by the professionals at Mole•Master.
Food and Grain Markets are Bouncing Back
Only a small portion of total grain production is used for human consumption. The majority of it is used for fuel and livestock industries. The panic runs on grocery stores generally had little effect on the grain market in 2020. Much more impactful market forces can be traced to the dramatic decrease in travel (fuel prices) and increased demand from China (AgriLife Today).
According to KFGO radio, “[Farmers’] fortunes have changed as food supplies tighten worldwide because of rising demand from China and as governments look to build stocks of food during the COVID-19 pandemic, spurring global food inflation.”
Many regions of the world are seeing larger than average harvests. In Australia, which has seen impressive harvests, “The interest in grain sheds as an option on farm storage has seemingly found a renewed vigor.” Silo owners may be able to capitalize on a potential market shift in 2022—as farmers overproduce to meet higher than expected export demand, this may lead to oversupply in 2022 or 2023. This would potentially provide a sizeable boon for the storage industry.
Building Material Supply Chains are Returning to Normal
Early 2021 saw a spike in the cost of construction materials. According to Metal Miner, “The Stainless Monthly Metals Index (MMI) increased by 4.5% in February.” Similarly, “The Raw Steels Monthly Metals Index (MMI) increased for the ninth consecutive month, rising by 0.5% as US steel prices continued to rise.” Many steel producers let production idle because the COVID-19 pandemic dramatically affected demand. However, construction demand has recovered more quickly than anticipated, which put pricing pressure on steel due to the time it takes to ramp up production.
Fitch Ratings believes steel production will quicken in order to meet non-pandemic levels of consumption. Silo owners looking to construct new silos can anticipate lower building costs in Q2 or Q3 of 2021.
Overall Silo and Bin Storage Outlook
Analysts predict that the global silo industry will keep pace with the global grain industry. Experts predict the silo and storage industry will see a Compound Annual Growth Rate (CAGR) of 4.8%. North America is forecast to maintain “the largest share in the grain silos and storage system market owing to the increasing number of expansion from major players in the market… The region is projected to dominate the grain silos and storage system market due to the increased demand in the U.S., as the grain growers are demanding high-quality and advanced grain silo and storage systems.” Flat bottom silos are projected to be the fastest growing segment in the grain silos and storage system market.
The silo and bin storage industry is recovering from the COVID-19 pandemic. Steel production is ramping up, which should result in a decrease from recent price levels. Current demand for grains and soybeans is high, which might lead to oversupply and silo storage issues in the future.
Consult with a silo expert for cleaning, maintenance, and inspection services as you prepare for 2021 and beyond. Request a quote here.