Feb 01, 2012

February/March 2012

Expansion Tests Co-op's Determination

cover photo by Jackie Roembke

Mar 29, 2012

A Quality Aeration Strategy

Four years ago, Calgary, AB-based OPIsystems Inc. launched OPI-integris to introduce the U.S. market to a novel grain management approach that has been widely adopted throughout the world for more than 25 years. The company’s mantra is “be proactive, not reactive” with respect to grain conditioning.

Utilizing a myriad of grain temperature and moisture monitoring components, OPI-integris claims to deliver the highest return on grain investments with its Advanced Grain Management solution, called IntegrisPro.

The three-part system consists of:

  1. Sensing inputs of temperature cables, moisture cables, and insect detectors, as well as headspace, plenum, outside relative humidity and temperature sensors, with data constantly read, then related back to the controller.
  2. Integration with automated fan, heater and other conditioning equipment controls.
  3. Customer Care Program, which provides ongoing software updates and help desk access with options for extended warranty and annual site maintenance.

Aeration application

Since its U.S. debut, the system has been successful in on-farm moisture control applications, and in smaller commercial operations with in-bin drying systems. But can the three prongs work together to provide return on investment for large commercial grain handlers and grain elevators?

“It can be applied to any type of bulk storage, but there is a caveat,” explains OPI-integris CEO Dave Crompton. “There are different levels of control that can be achieved based on your storage parameter. In commercial storage, the tanks are very large with grain depths that can exceed 100 feet. In that case, it’s impossible to push enough air through the grain mass to significantly change moisture content, so all you can do is control the temperature so as to maintain moisture content and grain quality.”

In grain handling terms, aeration is the practice of controlling the temperature of stored commodity. Ideally conditioned grain is achieved when the grain mass reaches its commodity-specific target temperature with the least amount of variance within the bin. Wide temperature variance can result in moisture migration, leading to condensation and development of localized high-moisture zones and potential grain spoilage.

Effective aeration requires a host of equipment and devices, such as aeration ducts, fans, roof vents, temperature cables and fan controllers. Many options are available in the marketplace, so selecting the right equipment can be a challenge without guidance. Crompton says OPI-integris’ Customer Care Program and its unique software allow it to help customers select appropriately sized aeration equipment.

“IntegrisPro helps to get the best benefits from the aeration equipment, and with Integris ProModel, we can help to identify the type and size of equipment required to achieve the target objective,” says Crompton.

IntegrisPro works using Remote Terminal Units (RTUs) to capture data and output fan and roof ventilation controls using wired and/or wireless communication back to an IntegrisPro software-configured PC. Integris ProModel’s ability to read, understand and use the data is crucial to its ability to effectively manage the aeration controls.

“Components are important, but if you don’t have the right knowledge or control algorithms and integration of a modeling program to help achieve the target objective, the components likely will not be able to do their job,” explains Crompton. “With Integris ProModel, we can analyze your specific conditions and make complex calculations to decide when and how long to run all the conditioning equipment, so as to achieve the targets in the most cost- and time-effective manner.”

The Customer Care Program provides ongoing software updates and management experts to work with employees on training and periodic retraining due to turnover.

Customer Care

The third prong in OPI-integris’ Advanced Grain Management solution is its Customer Care Program. All electronic or computer-controlled operation systems come with the inherent risk of failure, not to mention an initial learning curve for users. That’s why IntegrisPro customers have access to OPI-integris’ Customer Care Program for a nominal annual fee to help educate customers and assure the system is achieving positive results with maximum facility uptime. Tech support and remote support is also available for troubleshooting and fixing system problems, as well as site maintenance.

“We describe our Customer Care Program as a partnership,” says Crompton. “We take a long-term approach that starts on the front end with the IntegrisPro support that lasts through the sales cycle and on the tail end through the extended Customer Care Program. We go beyond the components themselves and assist with the functionality of the operation over the long term.”

The ongoing software updates include new developments of grain variety-specific EMC curves and control strategy improvements as they are incorporated into the system, which helps deliver return on investment over the long term.

Return on investment

There are two significant ways that the Advanced Grain Management solution’s aeration controls can provide ROI for commercial operations: energy savings and shrink control.

“We can save upwards of 80% on fan fan run-time,” says Crompton. “People tend to ‘air’ on the safe side with manual fan operation, so they typically run the fans more than needed, thus wasting electricity. When you run the fans too much, you get hit with a double whammy. You’re wasting electricity, but you’re also creating shrink.”

Shrink describes the devaluation of grain by removing excess moisture, thus reducing its weight and market price. The goal during storage is to achieve the right balance of moisture content to get maximum market value without any conditioning problems. Managing shrink is particularly valuable for grain elevators and commercial operations that handle higher volumes of grain because even a slight improvement can have significant financial rewards on that large a scale.

“It’s realistic to get a total return on investment on this technology in two years or less because we can achieve a 1% improvement in moisture control in one year. So if you’ve got a million bushels of grain, 1% improvement on corn at $7/bushel will reap $70,000 — about the cost of the IntegrisPro investment.”

Crompton adds that once the cost is recovered, the technology will continue to accrue benefits for another 10 or 20 years.

Controlling the temperature of stored grain leads to higher quality, less shrink, increased storability, grain deterioration prevention, reduced storage loss, and ultimately, higher profits. Although automated fan controls are not a novel concept, the heightened level of data capturing and utilization of information to help users make important management decisions is what sets OPI-integris apart. Improving its Advanced Grain Management solution will continue to be the company’s main objective and commitment to its customers.

Mar 29, 2012

Trans-Pacific Partnership Progresses

What originally started as the Trans-Pacific Strategic Economic Partnership Agreement in 2005 among Singapore, Brunei, New Zealand and Chile — known as the Pacific Four (P4) Agreement — has evolved into what is now called the Trans-Pacific Partnership (TPP), potentially one of the most influential Free Trade Agreements in the last decade. While the TPP requires every country participating to eliminate all tariff lines by 2015, its main objective is to eliminate many non-tariff trade barriers, such as incompatible biotech and food and feed sanitation regulations.

The TPP is uniquely designed to allow additional countries across the Asia-Pacific region to join in negotiations. Since the original P4 was established, five countries formally committed to the TPP: the United States, Australia, Peru, Vietnam and Malaysia; while other new nations continue to express interest in joining.

As the scope of the agreement grows, so does the opportunity for the United States to create domestic jobs by increasing exports to a region that represents more than 40% of global trade.

Trade policy experts Gina Tumbarello, manager of international trade, American Feed Industry Association (AFIA), Floyd Gaibler, director of trade policy, U.S. Grains Council (USGC) and Gary C. Martin, president and CEO, North American Export Grain Association (NAEGA), weigh in on who could potentially be among our newest trade partners and provide a timeline of the agreement’s previous and ongoing developments.

Feed & Grain: What is the significance of the Trans-Pacific Partnership in regard to its influence on the future of trade policy development?

Gina Tumbarello, AFIA: The TPP is anticipated to be a “next-generation” agreement, setting the standard for future Free Trade Agreements. It will address new and emerging trade issues and is expected to include provisions on cross-cutting issues not included in previous trade agreements.

One such provision is making regulatory systems of TPP countries more compatible, allowing companies to work more smoothly in TPP markets.

Gary Martin, NAEGA: This is quite a large regional trade agreement, and it’s significant because it is being negotiated on the heels of the global economy’s frustration with the Doha Development Agreement. The TPP is poised to emerge as standard-setting, at least in the Asia Pacific region.

Floyd Gaibler, USGC: The significance of this agreement is that the original went beyond other traditional agreements by covering broader cross-cutting issues dealing with trade constraints along the global supply and production chain. The TPP requires regulatory coherence among the participating nine nations, which will result in more seamless and consistent trade between the countries.

Another unique quality of the original P4 agreement is that it was designed to easily allow future participants to come on board. The real importance of this is that it’s viewed as the beginning of an Asia regional economic agreement that would ultimately launch what’s been termed a “Free Trade of the Asia Pacific Region,” an approach trade policy experts have long advocated to the western hemisphere.

F&G: What is the likelihood that other nations will join the TPP?

Gaibler, USGC: Canada, Mexico and Japan formally expressed interest in joining the TPP at the November 2011 negotiation meeting. Each of these three countries has been undergoing consultations with all of the nine current members and it’s [the USGC’s] belief that all three will probably join at some juncture.

Tumbarello, AFIA: Negotiations between the TPP countries and Japan, Canada and Mexico have been ongoing. As it stands, it is believed that the United States, New Zealand and Australia are the only TPP countries not yet ready to commit to adding new trading partners to the negotiations. The other six TPP countries have completed their consultation process with the three [interested] countries and appear to be open to having them join the talks in the near term.

The United States is concerned that adding new countries at this juncture could slow down the momentum of the talks. There is speculation on when new countries will join. Some say it is unlikely to happen in the coming months; others say that is unlikely to happen until late this year, at the earliest. Mexico is aggressively working to join as soon as possible, which may be due to the upcoming presidential elections on July 1. Once the elections are held, a government changeover could delay Mexico’s inclusion in the TPP negotiations.

Other future potential TPP participants include the Philippines, Papua New Guinea, Costa Rica and South Korea.

Martin, NAEGA: Japan has expressed interest, but its concern over the management of food safety is legitimate. It’s largely an import-dependent country and so it struggles with how to open its food supply market without a complex set of controls. Once the major decisions regarding those systems have been made, the best thing the United States can do is to support Japan in their decision making, as it is one of the best customers of U.S. agriculture products.

F&G: What makes the Asia Pacific region such an attractive market?

Gaibler, USGC: For the United States it’s important because there are over 100 different trade agreements in the Asia Pacific region itself — some bi-lateral and some regional — and we have not been participating in those, yet we know Asia will be a key driver of global economic growth.

The individual TPP partners are relatively small nations in terms of their economic size and growth, but the current negotiators combined constitute the fourth largest trading partner for the United States. If Japan were included, then it would rank as the second largest trading partner for the United States and represent 36% global GDP.

I think at some point China will take an interest, as well as other countries like South Korea, Taiwan and the Philippines. Once they understand the significance of this and the economic power behind it in terms of enhancing trade flows, other countries will consider joining TPP. Adding China alone would almost double the scope of the agreement, but it may not be ready because they’re transitioning into being less reliant on exports and shifting their emphasis on increasing domestic production and utilization.

F&G: How will the TPP directly impact American grain handling and exporting companies?

Martin, NAEGA: Without the TPP, there are uncertainties in trading with these countries due to lack of regulatory compatibility with respect to the sampling and measuring of grain. Regulations vary so dramatically, especially in the developing world, resulting in risk premiums in the transaction. The TPP would reduce those premiums considerably by improving the authorization and management of all those considerations that cost money to manage, like crop biotechnology, quality characteristics and other issues related to safety, mycotoxins and pesticide residues.

The cross-cutting issues and improvements that would be contemplated in the TPP would give us a leg-up from the efficiency standpoint and drive a portion of the price back to the producer and further incentivize production, which is good for the entire industry because it will lower the risks that are currently managed by trans-boundary shippers.

Tumbarello, AFIA: Japan is the United State’s fourth largest feed export market and fourth largest agricultural export market overall. While most animal feed enters Japan duty free, Japanese barriers to U.S. livestock exports are more restrictive. [If Japan were to join,] eliminating existing barriers and leveling the international playing field for trade would further develop Japan as an export market for the United States. The United States would ultimately be exporting more feed to Japan in the form of value-added products such as meats and dairy products, and those sales would benefit the U.S. feed, livestock and poultry industries, and their customers.

F&G: What phase of negotiations is the TPP in and when might it go into effect?

Tumbarello, AFIA: There is speculation on the timing of the conclusion of TPP negotiations. Last November, the leaders of the TPP countries met and announced the outlines of the agreement and reiterated their commitment to completing a “comprehensive, next-generation agreement.” While at the same time, Japan, Canada and Mexico expressed interest in joining the TPP negotiations. There is fear of losing momentum in the talks due to interest by other parties to join. While the negotiations are still very much in process, the United States Trade Representatives (USTR) has expressed the desire to have some kind of outcome by the middle of the year.

The USTR has recently released their schedule of informal meetings in the TPP negotiations. These will be held prior to the next formal round of meetings in Dallas. This aggressive schedule addressing topics such as intellectual property rights, investment, technical barriers to trade and rules of origin, shows USTR’s commitment to moving forward with the negotiations despite interest by new parties, and their commitment to completing a high-level, comprehensive agreement.

USTR is expected to complete negotiations on as many chapters as possible by early June. However, several items are only recently being negotiated; and controversial items such as labor rights … may require more time. On the other hand, there is also concern that with the United State’s elections so near, there is unlikely to be any significant advances for fear that [no one] will want to make any big decisions and offer concessions without knowing who the next U.S. president will be. Timing is still very much up in the air.

Gaibler, USGC: Once the TPP partners come close to finalizing these negotiations, the Administration must grant it Fast Track authority, which means Congress will consider the agreement as a whole and it will be voted either up or down without subject to amendments or ratification.

This is important because countries will be reluctant to finalize sensitive negotiations or serious concessions knowing that someone in Congress can take those away by offering amendments. The Administration has already signaled it will submit the Fast Track legislation at the appropriate time.

Conclusion

The Asia-Pacific region holds a wealth of potential for U.S. economic growth, specifically within the agriculture sector, and industry stakeholders will continue to strongly support its passage by the U.S. Congress.

Once enacted, the Trans-Pacific Partnership will vastly improve trade between the United States and its TPP partners by more adequately addressing regulatory incompatibilities that exist today between some of the nine countries.

Although Japan, Canada and Mexico have announced intentions to join negotiations, the next round will take place in Dallas, TX, in May and is open only to those who have formally committed to the TPP’s provisions. The USTR will release a TPP negotiation update on its website by this summer.

Mar 28, 2012

Long-term Planning Offers Gains in Grains

Feed & Grain’s editor Jackie Roembke sat down for an informal discussion with Elizabeth Hund, senior vice president and division head of U.S. Bank Food Industries, to discuss the current state of global credit markets and strategies borrowers can implement to better manage their risk.

Feed & Grain: In your opinion, what trends are influencing the credit market?

Elizabeth Hund: Right now, the largest issue is what’s going on in Europe — particularly the impact of the European financial crisis on Euro banks and their ability to make capital available in the United States. We have a lot of international banks that are in this market and as they are under stress in their home country, they’re going to bring their resources back to Europe versus deploying them in the United States. We’ve seen a lot of that in the last six to nine months. It will put more pressure on domestic banks to fill the gap for large borrowers who need a large credit line.

If you’re looking at general financing, the banks in the United States are in better shape than they were a couple of years ago. I think the banks have money to lend to strong companies. In general, the grain and feed industries are in good shape. These are credit worthy borrowers — it’s the euro banks that have drawn back.

When you look at managing the supply chain — if you look at a bank as suppliers of credit —you need a mix of domestic and internal banks because you’re never sure of who will be able to supply you with sufficient capital. Where the shift is now is away from international and back to domestic, but this could change as Europe addresses their sovrgn debt issue.

F&G: To prove you are credit worthy, what should you be doing?

Hund: First of all, I think the industry in good shape. Most of the feed and grain companies have strong and liquid balance sheets. They are not carrying a lot of term debt. I think that’s the first thing. In terms of demonstrating credit worthiness, you have to have the ability to manage what is by nature a volatile industry, by maintaining a strong balance sheet.

You do that by having very little long-term debt; using the futures markets when applicable; and by staying liquid. For example, three or four years ago when grain went up, and corn was at $7, $ 8 dollars a bushel, you had companies needing to increase lines of credit quickly to meet margin calls. You don’t see that today — in part because grain hasn’t reached those highs in awhile and — because the banks and the companies are in better shape to handle it. Nobody wants to be put in that position. Credit lines are larger than historically has been the case, and the banks are more tuned into how to handle temporary changes if needed. I just don’t see the short-term pressure that we saw three years ago.

F&G: From a bank's perspective, give me an example of a company who isn’t in the best position, what would they be doing wrong?

Hund: I think where people get in trouble, all of us in the industry, whether we’re lenders or borrowers is when we start taking a short-term view vs. a long-term view… When we start managing for the next 30 days, the next 90 days, the next crop cycle etc. The industry is getting much more global and grain is leaving the country and that’s a good thing for the domestic industry. When you only look at, ‘Oh, the price of corn is up today, and it should be up for the next 30 days; therefore, I’m going to make this decision or that decision…’ — that’s problematic. We are no longer a domestic business. We are driven by things happening worldwide — whether it’s weather, politics, some kind of a man-made crisis, like the Euro crisis or a foodborne illness. All of those issues drive our market and it’s no longer about what’s the demand for feed and grain in the United States. This requires companies to change their entire frame of reference.

F&G: If you were going to list a few risk management strategies for borrowers, what would they be?

Hund: I think companies that do this well have certain characteristics. They dedicate resources to risk management. You will hav e a staff that looks at all types of risk — volatility in price, supplier or counterpart risk — the people who do it very well have dedicated resources toward it.

They have board awareness and accountability at the board level for policies around risk management.

They usually have a written risk management policy. It will have leeway in it so if they are involved in trading or using futures market there is room for same time decision making but there are policies and guidelines that are monitored and enforced at the board level.

You’re seeing a lot more scrutiny regarding counterparty risk. Who’s buying this product, what are their resources and how are they paying me? and who are my suppliers? Since we’re talking banks, whether it’s your bank or the person taking your trade — MF Global is a perfect example of this. There was counterparty risk at MF Global. People assumed that their deposit accounts were covered and if it was handled properly those accounts should have been segregated. It didn’t work out that way, and people were hurt. It was a wake-up call for knowing your counterparty.

From a banking standpoint, do I have more than one bank? Is my bank knowledgeable about my industry? Is it sound? Is it domestic or foreign? What if I’m doing fine but my bank is under stress and can’t provide me with the credit facilities that I need? What do I do then?

To me, risk management is very broad. Companies that manage this well manage all aspects of it. It demonstrates discipline about looking at this industry in the long view, and knowing there will be downturns and run ups in the market, but being disciplined about it so your balance sheet can be relatively stable.

F&G: For the banks a company has an existing relationship with, how do you vet or review that its still a good fit for your business?

Hund: I think the client has the right to know, and I think it is appropriate to ask to see their balance sheet. Ask how they did on the stress test — because banks are now being asked by go through these exercises with the OCC regarding the strength of their balance sheet. I think it is perfectly appropriate to ask what their public ratings are, if they are a publicly rated bank. What are your lending policies? What percentage of your portfolio is made up of my industry? If you’re the only grain client a bank has, how well will they be able to understand and address market changes? It’s OK for customers to ask for banks to demonstrate their strength. As a banker, I would encourage customers to do that.

F&G: Any final thoughts?

Hund: It’s a good time in the grain and feed industry, but it’s also a challenging time. I’m more bullish than I have been in a long time. I think it’s become a global industry and that’s good for all of us.

Mar 26, 2012

OSHA Amplifies Efforts

Popularized in by the misspeak of former president George W. Bush, we're all familiar the following idiom, though I ask that you allow me to take liberties with it for the purposes of this column: "Cite me once, shame on me; cite me twice, shame on me and the entire enterprise." Thank you for humoring me, but this was the first thing that came to mind as Eric Conn, head of OSHA practice with law firm Epstein Becker Green, outlined OSHA's new strategy for adding new members to its least popular club: repeat violator.

Conn's presentation, "Mitigating Safety & Health Risks," at the National Grain & Feed Association's (NGFA) 2012 Annual Convention, an executive-level event held in Charleston, SC, featuring industry-relevant sessions hosted by high profile speakers, repeat violations have increased 225% since the Obama Administration's "new sheriff" transitioned to an enforcement-heavy strategy by shifting from a reactive to proactive philosophy. While the organization is known to target particular industries, within its scope of its local and national emphasis programs, the organization "hand selects past violators as targets for inspection." According to Conn, this means OSHA now treats workplaces within a corporate family as one workplace, meaning violations cited within a five-year span including different locations will be treated as repeat offenses as they are viewed as a systemic issue.

Yes, dangerous working conditions and violations of the law should be dealt with accordingly, but as it stands, once your organization has been added to the repeat violators list, it will be five years before for it can qualify for a clean history reduction; and if you're labeled as a severe violator, of which there currently is not a procedure in place for removal from this list.

Since "follow-ups and repeat violations have been [OSHA's] biggest weapon," Conn recommends companies challenge citations regardless of how minor the penalty.

"While the dollar amount may seem small and you may think it's easier just to pay it and move on, over the long-term, the issue may occur again say four years from now at a different location and you will become a repeat violator and will have to deal with those consequences," Conn explains. "

With the nuances of regulation are left up to the interpretation of the inspector, it's perfectly reasonable for the informed manager to take every precaution to prevent this falling to this cycle. Conn suggests companies – especially cooperatives and other multi-location grain operations address potential problems and increase their communication across the board.

Bottom line, avoid the shaming and cover your bases, enterprise wide.

To view Conn's violations check list, visit feedandgrain.com and enter ID Code: XXXX in search bar. Also, look for more insight into OSHA's emphasis on the grain industry in the June/July issue of Feed & Grain.

Mar 16, 2012

Aeration Upkeep and Optimization Guide

The practice of aeration is used in grain handling facilities to maintain the condition of stored commodities after harvest. Guidelines for aeration are based on long-established scientific principles involving static pressure, relative humidity and moisture content.

Aeration may seem like a complicated science, but it can be distilled to one simple concept: Evenly distributing air to maintain a safe storage temperature will result in the desired grain condition.

This is achieved through a host of equipment and devices, such as aeration pipes, fans, roof vents, temperature cables and fan controllers. Selecting the right combination of these can be challenging, so Feed & Grain sat down with leading experts in the field to help guide your decisions in equipment selection, system optimization and maintenance.

Equipment overview

The essential components of an aeration system are:

  1. Storage Vessel: Corrugated steel bin, concrete bin or flat storage (building or Quonset)
  2. Fans: Axial or centrifugal — the power source for air delivery throughout the system
  3. Distribution System: Ductwork sheets, round tubing or half round ducts, full floor or flush floor
  4. Ventilation: Gravity vents and/or powered roof exhausters

System design

To design an effective aeration system, first establish the desired moisture content of the commodity being stored and its corresponding CFM. The CFM refers to how many fan run-time hours are needed for a cooling front to pass through the bin. Multiply the denominator by 12 hours to calculate the answer. For example, 1/10 CFM will take 120 hours to cool the grain bin; 1/7 CFM will take 84 hours, and so on.

[email protected] president Kevin Miles provided the following tables to determine each commodity’s required CFM based on target moisture content:

Corn

Target Moisture Content CFM

14 - 16% = 1/10

16 - 18% = 1/7

18 - 20% = 1/6

20 - 22% = 1/4

Above 22% = Not Recommend Operation

Beans

Target Moisture Content CFM

13 - 14% = 1/9

14 - 16% = 1/5

Above 16% = Not Recommended Operation

Wheat

Target Moisture Content CFM

13 - 14% = 1/15 - 1/30

15 - 16% = 1/12 - 1/15

Above 17% = 1/10

Next, determine which type of air delivery system is ideal for your application. [email protected]’s Miles suggests several options:

  1. Pull down system (negative)
  2. Push system (positive) with exhausters
  3. Pull up (positive without exhausters)
  4. Push-pull (high-air system)
  5. Turbo-charged (existing high-air)
  6. Manifold system
  7. Canal system
  8. Tower system

The ideal system for each application depends upon the type of bin — steel or concrete —, the number of tanks the system involves, whether it’s new construction or a retrofit project and budgetary considerations. A professional millwright service, a bin dealer or an aeration equipment dealer can help select the best set up for every price point.

If cross-contamination is a concern, Todd Morey, sales manager for Airlanco, recommends the AirAuger, a canal aeration system that doubles as a bin unloader.

“It’s an unloading aeration system we provide with no moving parts, so it promotes the zero-bin entry initiative,” says Morey. “It works using concrete troughs in the grain bin floor to allow standard gravity unloading, and then you turn on the fans to force out whatever gravity doesn’t expel. A properly installed system should leave less than a bushel of grain behind, so you can easily go from corn to soybeans without worrying about cross-contamination.”

Fan selection/sizing

Selecting a fan type and correctly sizing it is the next step in designing an effective aeration system. Randy Larson, sales, Sukup, says to ask the following questions to help choose between centrifugal or axial fans:

  1. How is the bin going to be used, i.e. aeration, cooling or wet holding?
  2. What is the bin’s diameter and eave height?
  3. What type of grain is in the bin?

“Your answers will give you an idea of the static pressure you’re dealing with and then the proper fan or fans can be selected,” says Larson.

Axial Fans: Larson describes the blade as “shaped like a propeller with the motor sitting inside the fan housing and the air stream.”

They typically run at 3,500 rpm and are the fan of choice for commodities with a static pressure between 0 and 3.5 inches.

Centrifugal Fans: These generally operate more quietly than axial fans. The blade is wheel-shaped like a squirrel cage and the motor sits outside the housing.

For static pressures of 3.5 to 7 inches, Larson recommends a 1,750 rpm centrifugal fan and for static pressures above 7 inches, he suggests a 3,500 rpm model.

Scott Chant, president, Safe-Grain, Inc., notes that appropriately sizing fans plays a major role in selecting other supporting pieces of aeration equipment. “Once you determine your fan size, you can calculate what size tunnel you need to get the air from the fan to the bin and the square footage of perforated material you’ll need to get the air out of the bin.”

Once again, contacting a local bin dealer or millwright can ensure every calculation is properly done.

Optimization options

Uniform bin filling is integral to producing the desired temperature and airflow. While not essential to the operation, according to Eli Troyer, owner and president of AgriDry LLC, a grain spreader is a smart addition to any corrugated steel bin. “Hot spots,” where spoilage or bridging occurs, compromise an aeration system’s ability to effectively cool the grain mass.

A spreader uses several long chutes to evenly disperse fines during loading and create an equalized pathway for airflow throughout the bin. It can be used on any sized bin and is ideal for commodities such as soybeans and corn.

“Our spreader has no motor, electrical parts, or moving parts at all, so there’s little upkeep involved” says Troyer. “Once it’s put inside the bin, it becomes a permanent fixture and can last nearly the life of the bin when the optional Tyvar lining is used at high-wear points.”

Other devices for aeration system optimization include temperature cables and fan control systems. Temperature cables run from the top of the bin throughout the depth of the grain and provide real-time readings, which can indicate problems in a bin if a reading comes back outside the acceptable range.

Fan control systems, such as AgriDry’s Bullseye, work by setting a target moisture content and a target temperature for the commodity being stored. Then, using the temperature cables, it monitors the grain temperature, the outside air temperature, and the relative humidity and will operate the aeration fans to maintain indicated target levels.

However, Miles cautions that not every application is a suitable candidate for automation.

“I usually recommend the human interface for fan operation,” says Miles. “But if you have an elevator in a remote location with no staff once the bin’s loaded, then it makes sense to use an aeration controller because it will do a better job of conditioning than letting it sit unattended.”

Maintenance matters

Aeration system maintenance plays a key role in grain conditioning. Considering the tips below can help increase the longevity of an aeration system:

  • Inspect electrical

- Physically inspect the electrical components and wiring before every harvest season

- Look for evidence of rodents or birds — often the culprit of wiring deterioration

  • Read owner’s manuals

- During annual inspections, refer to the fan or motor’s operator manual. Many manufacturers provide them online if the original is not available.

- If unsure of the manufacturer, make and model, search the web for a similar size and type of fan to find a comparable maintenance book

  • Ensure cleanliness

- Properly clean out the grain inside and outside the bin every time it’s emptied, or once a year at minimum

- Reduce the likelihood of rodent and insect infestation by eliminating food sources — fines and grain dust

  • Keep water out

- Physically inspect the bin roof and sidewall joints for leaks. Allowing rain to enter will reduce life expectancy of the bin and floor

- Properly channel water away from a bin’s foundation and fan area to prevent ponds from forming

Mar 15, 2012

Tying The Islands Of Automation Together

As automation continues to grow in grain storage facilities, it can be challenging — for many reasons — to implement the right automation plan. Many facilities have operated for years with existing infrastructure and disparate control systems from days of the past, such as pushbuttons, switches and lights.

Typically, automation systems grow little by little over time and become a hybrid of antiquated hardwired controls along with programmable logic controllers and human machine interfaces. Without a solid automation road map, the disjointed automation system focuses only on the task at hand, creating several “islands of automation.”

It seems that conventional thinking supports the islands that are spread throughout the facility, leaving facility operators to “run around the facility” rather than “run the facility.” The primary objective should be to unify the facility automation system and create a facility central command, where the automation system gives the operators insight to the entire facility and visibility to what is happening with each supporting system through a common interface. This concept requires a challenge to conventional thinking and the development of a strong automation road map and implementation plan.

What systems are oftentimes standing as islands? This question alone challenges longstanding paradigms and is the root of identifying a plan and the development of your facility central command system. By examining some specific functions, you may identify some islands at your own facility. Think about the following examples and how much benefit it would be to have complete facility visibility from a central command station:

1. Hazard Monitoring:

• Visibility into live bearing and rub-block temps and speed sensors through live temperature readings and trend charts

• Automatic interlocking for controlled shutdowns on alarm sensing

• Automatic emailing to selected roster on alarm conditions

• Complete reporting for setpoint modifications and alarm data (when occurred, when cleared, when acknowledged and by whom)

2. Grain Temperatures

• Visibility into live grain temperatures and alarms when they reach alarm levels or rate of rise notifications

• Complete trend charts for temperatures over time 3. Motor Currents

• Live motor current values on the operational screens along with complete trend charts

• High current alarms activated based on specific commodities being run 4. Dust Collection

• Complete control of all dust systems and visibility into differential pressures across dust filters

These are just a few examples of value that can be realized by tying together your islands of automation. The objective is to decrease the cost of operating your facility by maximizing your investment and power of your automation infrastructure. Challenge paradigms of the past and examine what you can do at your facilities.

Mar 14, 2012

Ultrasonic vs. Radar Level Measurement in a Grain Shipping Terminal

State of the art ultrasonic level measurement equipment was installed in 1997 on 42 silos at Cargill’s Irving Elevator in Portland, Oregon. The equipment was to provide level data to an existing PLC which would then use the data for alarm and control and make the data available to a graphic display in the control room which was being added as part of the level measurement system. The goal was to improve utilization of the silos and decrease demurrage fees on rail cars and ships by speeding loading, unloading and blending operations.

The silos are 127 ft tall, both round and interstice of various shapes, with cone and offset cone bottoms. The primary criteria in selecting the ultrasonic transducers was the silo height which resulted in selecting transducers operating at 13 kHz. Lower frequency transducers generally are larger and have more power than higher frequency transducers.

Set up of the ultrasonic units was very time consuming both for the instrument vendor and the customer and was performed intermittently over several months. All measurement points were working satisfactorily at the end of this period.

Over time, some measurement points had recurring problems with erratic readings. The readings would jump downward several feet from the true reading and return to the correct reading as grain was move in and out of the bin. Some of the ultrasonic units were changed out to yoyo type mechanical level transmitters.

Level revisited:

In October of 2009, a dust collection system was added at the Irving Elevator, now a part of CLD Pacific Grain, and the level technology discussion was reopened, primarily for the two 45 ft tall screening bins. One bin was for dust and the other contained wheat and chaff. In 2010 a 25GHz loop powered radar unit was installed on the dust bin (Figure 1) with mixed results.

The loop powered unit was moved to a wheat bin and a 4 wire 25 GHz unit installed on the dust bin to provide more power to penetrate the dust. The 4 wire 25 GHz unit was then moved to another wheat bin, and a 78 GHz unit installed on the dust bin. More 78 GHz units have since been installed on wheat bins.

The 78 GHz units are loop powered with a range of 100 meters and a 4º beam angle. The power and frequency aid the unit in penetrating dust and provide a strong return signal with minimum skip.

One yo yo type mechanical level transmitter has been replaced with a 4 wire 25 GHz unit and the others will be replaced with the 78 GHz units as needed.

Progress:

The ultrasonics level transmitters were the economical solution at the time they were installed and remain the most economical for many applications.

On tall grain silos physics work against reliable operation. Lower frequencies are required for longer range transducers used in tall silos and dusty bins. As the wavelength increases in relation to the grain size of the material being measured signal skip becomes more problematic.

Radar behaves in an opposite way to ultrasonic. As the frequency increases, smaller horns can be used allowing for lighter, easier to install units. Range increases and beam angle decreases with higher frequencies and the wavelength decreases.

Decreasing the wavelength relative to the grain size of the material being measured allows for reflections from the individual grains to return directly to the instrument which results in strong direct echoes and scattered indirect echoes. Wave lengths which are long in comparison to the grain size cause the signal to skip off the bulk surface causing indirect echoes which can be relatively strong in comparison to the desired direct echoes. Skip is more noticeable in large diameter bins where the difference in return time is greater. Performance on the wheat bins benefits greatly from the decreased wavelength.

Performance in the dust bin in Figure 1 benefits from the fact that Increasing the frequency of the microwave signal also increases its ability to penetrate dust and light build up on the transmitter lens. The narrow beam angle makes start up easier by reducing reflections from the hanging balls shown in the picture and advance echo processing takes care of the rest of the false echoes.

Conclusion:

Radar has advanced rapidly over the last few years, in part because much of the echo processing abilities of the newer units rely heavily on lessons learned with the ultrasonics units. Ultrasonics technology was around for years before signals could be stored and process digitally, something taken for granted with current radar technology. Methods for viewing and manipulating echo profiles and detection algorithms were already in use before the current generation of radar entered the picture.

Figure 1 also illustrates another phenomenon in improved technology. As improved technology makes the tough applications routine, the new technology is asked to perform in even tougher environments.

In 1997 when the 42 level transducers were first installed the best that could have been said of the dust bin would have been “Well, if you really want to try it…..”

Glossary:

Skip – As applied to non-contacting level measurement, occurs when the transmit signal hits the material surface at an angle and the beam splits with part of the beam returning directly and the rest of the signal returning along one or more indirect paths.

Beam angle – The specified angle of the transmit signal measured from the -3 dB point on one side of the transmitted beam to the -3 dB point on the other side of the transmitted beam.

Ultrasonic – Signals commonly in the range from 20 kHz to 10 MHz. In long range level measurement may range from below 10 kHz to beyond 60 kHz.

Acknowledgements:

Todd Hunt of Branom Instruments who persevered to provide his customer with the right technology and provided the dust bin photograph.

Mar 12, 2012

8 Essential Operations Management Software Features

In the world of agribusiness software development, three key trends have driven innovation: the rapid speed of technological advancement; the consolidation of the private elevators into multi-division, multi-location conglomerates; and the volatility of commodity markets. Agribusinesses began overhauling how they collect and use data decades ago, but today’s operations management software has been tailored to assist sites in managing their risk exposure. Instant access to real-time financials, inventory reports and market information has become a vital function in modern day grain and feed mill operations.

“The faster you can get at the information, the better you can manage your company,” explains Oakland Corporation’s vice president Chuck Carlson explains. “Companies have so much at risk as far as dollar values they need quicker access to their status — and monthly reports do not cut it.

Without close observation, grain companies can lose of money; however, with a solid software system, cooperatives and elevators can immediately address pricing problems or inventory issues before it’s too late. Real-time positioning allows managers to do its cash contracts, and allows grain merchandisers to gauge what needs to be bought or sold to properly position the company for less exposure on their commodity prices.

"[Manager’s] want to know they've covered their exposure to make better decisions — like whether it needs to buy or sell and where you should be profitability wise," says Sherry Drutman, vice president North American sales, OpenLink Agribusiness Solutions Group. "If you have too many cash contracts and haven’t hedged the market — and as we know the last few years the market has been crazy — it’s important to figure out where you’re going."

Tips for purchasing new operations management software

Given the importance of this fundamental business function, if your company is looking to upgrade or enhance its software package, how do you decide what to look for in a software package? Industry suppliers weighed in to our

“Risk management should be most important factor to address in a company,” Drutman says. “Instant live information is crucial for people to be able to point and click to find what you want right away.”

1) Full-Service Supplier

While the functionality of the software is important, the level of service the supplier provides after the sale and its understanding of your business is an important factor influencing the success of the software application.

“Software is a byproduct of what the service provides,” Carlson says. “If the software supplier has employees who have worked at a cooperative or agribusiness site before — knows what you go through day-in and day-out —they can use their experience to help its development staff understand what you need from its operations management software.”

Many times the software representative acts as a consultant to the customer by introducing best practices and the new procedures innate to updated accounting and site management systems.

Customers are advised not to purchase from resellers who may not be sure of the product’s full abilities.

“When you buy an application you’re not just buying it for a year or two, you hope you never have to do this again,” Drutman notes. “The people you’re dealing with will be around to let you enhance the system — to grow with you — you want them to be able to offer upgrades and enhancements and show they do enhance their products.”

Ask the supplier for testimonials or other customers who may be interested in sharing their experience with the product.

2) Onsite Training

When it comes to new technology, the level of comfort will vary with every employee within every company — and, yes, it takes longer to train the less computer savvy operator so it’s especially important that the software supplier respects the pace the person or entity needs.

“Our goal is making sure they are comfortable before considering the installation complete,” Carlson says. “We go onsite to train and deal with real time situations.”

Oftentimes, the trainee will be taught how to use the system using a dummy program so the real information isn’t altered. This onsite interaction also provides additional opportunities for the software supplier to learn to better adapt the software to the client’s needs.

3) Customization

Agribusiness is changing so fast and the information can come and go in all different directions so the software system a company purchases should offer some level of customization.

“Sometimes [software] looks great when you buy it, but as the grain business evolves — your business changes — if you don’t have a software supplier who is offering updates and changing with these new requirements, you’re going to be back to where you were with an older system," Drutman says.

Carlson agrees: “Over the years, development is constant; we update all clients twice a year. Based on customer feedback, if we discover a feature even two customers have requested, we add it to the next development cycle and offer the option to everyone.”

Many packages allow the user to specific the level of automation it requires from its operations management software.

“Customers can customize how hands off they want to be,” Dan Barton, director of sales and marketing, Grossman and Associates. “Some companies use it as a failsafe — where they approve actions between steps; other places are comfortable with allowing most tasks to be automated.”

Not only be flexible on the front end, but flexible to change with the times and integrate with other systems.

4) Cross-platform Integration

Reed Schneider, who works in business development with iRely-Summit Software, suggests companies spend extra time researching the computer language the software and accounting is written in to ensure the platform is using up-to-date standard code.

“A lot of times the system will look graphical, like its Windows based, but it’s built on a Dos or “green screen” accounting system underneath — meaning the problems will come when you want to drill down in current or historical data because live data will ultimately be impossible,” Schneider says.

Check to make sure the software is truly fully integrated. Schneider explains: “You don’t want to end up with a modular system that has been cobble together from different sources. We call this the Tower of Babel effect, when you have different languages and different types of operating, it will likely lead to a problem.”

Buyers with existing systems also want to ensure the new system can operate on multiple platforms on multiple locations. Everyone leans on high speed data, but large amounts of data put greater demands on system. Ask about the system’s reliability and bandwidth.

5) Data Dashboard

As mentioned earlier, we live in a world of instant gratification, and manager and merchandisers need the tools to be able to make decisions faster. Upper management doesn’t necessarily want to take the time to learn how a software package works so a data dashboard offers a customizable, at-a-glance overview of pertinent information without the need to drill down deep into the software.

“Management wants to know information, but doesn’t want to hunt for it,” Carlson says. “A dashboard offers this solution by allowing the user to pull the screen up and see the company’s cash position, grain positions, where accounts receivable, accounts payable is at, cash flow statements.”

6) Technology

Thought it may cost more money on the front end, it's better to invest in new technology that does what you want and need on rather than dealing with the consequences of an antiquated system.

“Sky’s the limit,” Barton says. “Technology has proven to be the most valuable tool because you can do anything with it. It’s great because you can tailor the software to do what someone wants it to do and not everybody needs it to do the same thing, but you can give them what they need.”

Vendors predict more emphasis will be placed on mobile applications for tracking real-time numbers from a cell phone or tablet.

7) Improved Customer Service

The residual benefit of these efficiencies is the ability for grain elevators and feed mills to provide better, more accurate service to their customers. Companies are increasingly automating the dissemination of administrative and communications duties to make operations leaner, for example, a distribution system sending statements, pay receipts and invoices to customers.

“In contrast, I’ve been told by a lot of managers they want to automated portions of their document delivery, but their customers, the farmers, enjoy coming like coming and the interaction so they won’t do it because they don’t want to cut out the human interaction,” Barton notes.

8) Cost, Labor Savings

A strong software package can create profitability once everything is streamlined within one system. Efficiency may mean reducing your work force. The move toward paperless, integrated software means – then you don’t have to wait for stuff to get done.

“The big goal to install a system with one touchpoint, all your work in one place – it’s integrated so no one is doing double entering,” Drutman says. This allows the small office to focus on what [tasks] it thinks is important, and leaves the rest to the system.

“The bottom line is what’s going to keep you in business and more and more people looking to reduce their workforce – whether we like it or not — and the only way to do that is to be more efficient and invest money into your infrastructure.”

A strong front and back solution for an elevator, operations management software package intertwines all functions that otherwise would typically need to be manually entered is done automatically. You may be buying a system to replace individuals, but it saves time and money because it performs functions at the push of the button.

The benefits of a quality operation management software package come down to the integrity of the data. When you have integrity of the data, it’s much easier to manage your company and go home with piece of mind.

Mar 9, 2012

Industry Reaction to USDA Office Closures

The U.S. Department of Agriculture ushered in the new year at the American Farm Bureau Federation Annual Meeting on January 9, with Secretary Tom Vilsack's announcement of USDA's "Blueprint for Better Services." This initiative will close 259 USDA offices across the country in 2012. Vilsack explained that the closures were required because the operating budget for USDA has been cut by $3 billion between 2010 and 2012. He assured the nation that the closures in the food safety area "are about administrative personnel, not inspectors" and "will have no impact whatsoever on our responsibility to ensure the safety of the food supply."

A month after the closures were announced, the reactions of American agriculture have varied among different industry segments and the various USDA programs that serve them. We look at three of the most important reactions.

Farmers and FSA Closures

The largest and most heated response has been farmers' reaction to closure of 131 Farm Service Agency (FSA) offices in 32 states. The offices to be closed are small facilities scattered throughout rural areas, where one or two USDA employees provide farmers with information about, and assistance in applying for, a number of USDA programs, including disaster assistance, farm loans, and crop subsidies. All are within 20 miles of another USDA facility that will not be closed. The network of small, dispersed offices was created because (1) decentralized personal assistance was deemed helpful to farmers' participation in USDA programs; and (2) many rural congressmen earmarked these offices to spread "pork" throughout their districts. USDA asserts that internet technology now permits farmers to apply for programs at significant cost savings without face-to-face meetings with USDA personnel, and that today's politics makes deficit reduction more important than maintenance of local offices.

A number of congressmen and county commissioners representing rural areas have objected to the reduction of particular FSA offices in their neighborhoods. They argue that most farmers complete program applications by hand and that federal regulations imposing fines on farmers for improperly-filled-out forms make it extremely risky to use less reliable internet systems. They predict that the result of the closures will be decreased participation in federal agriculture programs. USDA admits its current computer programs are complex but promises more state-of-the-art, user-friendly software by 2013, when updates that are part of its MIDAS ("Modernize and Innovate the Delivery of Agriculture Systems") initiative become effective.

Scientists and ARS Labs

USDA's plan to close twelve research programs at ten Agriculture Research Service (ARS) locations have drawn some reasoned objections from the scientific community. Scientists at labs scheduled for closure and nearby farmers growing crops affected by their research argue that research programs have been purposely located near the crops and pests they study, and that the programs will not be feasible—either economically or technically—if they are relocated to distant, different climate and crop environments. This complaint has been asserted, for example, against the closures of a South Texas lab studying invasive insect and weed species crossing over the Rio Grande from Mexico; a research facility in Florida studying subtropical diseases; and a cotton research station in Kern County, California, studying serious threats to the California cotton crop.

Food Processors and FSIS District Offices

The most dramatic change—from a bureaucratic standpoint—in USDA's plan is the closure of five Food Safety Inspection Service (FSIS) district offices in Minneapolis, Minnesota; Madison, Wisconsin; Lawrence, Kansas; Beltsville, Maryland; and Albany, New York. These five district offices currently oversee FSIS work in 20 states—a tier of 14 northern states from Montana to Maine and six border states: Kansas, Missouri, Maryland, Delaware, Virginia, and West Virginia—which will have to be reassigned to one of the ten remaining district offices.

Despite the importance of FSIS's food safety mission, these closures have generated little objection from industry or its critics. There appear to be two principal reasons for this silence. First, much of U.S. food production is not regulated by FSIS. FSIS oversees only meat, poultry, and processed egg product plants. All other food processors are inspected by the Food and Drug Administration (FDA) and, therefore, are unaffected by restructuring at FSIS.

Second, meat packers, poultry processors, and food safety advocates have not challenged Secretary Vilsack's statements that the closures will affect only "administration" and not "inspection." A typical plant already has an everyday, on-site FSIS inspector at the plant who has two levels of supervisors (a supervisory veterinarian medical officer, who reports to a front line supervisor) between him and the FSIS district office. Thus, consolidation of functions at four-level distance from the plant should have little impact on day-to-day operations.

A Precursor of Bigger Reorganization to Come?

The current emphasis on cost-cutting and deficit reduction should result in USDA's office closures being put into effect. Other recent developments indicate that the same budget pressures may force a much more significant reorganization of federal food safety agencies, and that USDA's closure of FSIS offices may be only a first step.

The possibility of major reorganization was raised on March 2, 2011, in the General Accountability Office report that proposed consolidating USDA's FSIS with FDA (in the Department of Health and Human Services) and 15 other agencies with food safety functions, to form a unified food safety agency. This proposal has recently been revived.

In January 2012, the Obama Administration asked Congress for authority to consolidate federal agencies in order to create efficiencies and save costs. It stated that its first effort would be to combine six business and trade-related agencies. White House Office of Management and Budget (OMB) officials stated that consolidation of FSIS, FDA, and other food safety agencies was second on their list. After some adverse comments from agriculture industry and consumer advocates, OMB modified this statement on January 26, 2012 by saying that it had not yet confirmed any proposals for agency consolidation beyond the initial combination of trade organizations, and that it would not do so until Congress has given President Obama the authority to consolidate agencies.

Reading these tea leaves, it appears that the FSIS-FDA consolidation has been seriously, and favorably, studied by OMB, but is "not confirmed." However, it may well take place if Congress grants the President authority to reorganize. If this dramatic reorganization advances, it will create a new order of food safety oversight in the U.S. and raise significant regulatory and budgetary issues. All interested parties should stay tuned.

Mar 7, 2012

Risky Business

Everything we do has some risk. Walking down the street you could get hit by a car, or an asteroid for that matter; eating an ice cream cone you could choke on the cone or get sick from bacteria in the ice cream. There are risks in investing in a new feed mill — the technology may change, sales may drop such that your payback period lengthens, or the crane installing new bins for the feed mill could fall over and destroy some of your existing grain storage — but some risks can have a bigger impact on your business, and the prudent feed and grain manager analyzes risk appropriately and manages accordingly.

All risks don’t have to be all bad. For example, what is the risk of significantly increased demand for a newly developed horse feed you are selling (which is a good problem to have) but are these risks lost sales or erosion of goodwill if you can’t meet demand, and how would this affect your business? Probabilities come into play here also: in other words what are the chances “so and so” will happen? Do you have historical data which can help you determine how often a certain event or occurrence happens in your business? Do you need to check with your insurance agent to help you assess risk? In fact, that is exactly why actuarial tables were developed historically — to give businesses the chance to better understand what might happen in given situations and the probability associated with certain events.

Methods to reduce, mitigate risk

Our purpose in covering risk in this column is not to make you an expert on everything involving risk and how to handle it, but rather to ask some important questions and provide some management ideas on a topic we don’t often dwell on. Risk makes most people uncomfortable, and the uncertainty associated with it causes people to worry. As such, the (mostly) rational nature of the general population and business managers generally leads them to do something to mitigate and minimize risks (though we do have to be careful about making broad generalizations as there are always the thrill-seeking adrenaline junkies that thrive on risky activities such as sky diving or bull riding).

Basically, people deal with risk in five basic ways: avoiding risk, retaining risk, transferring risk, sharing risk and reducing risk.

Avoiding Risk

As an individual or as a manager, you can avoid some risks altogether by refusing to accept a particular risk, though this may not possible for all choices. Risk avoidance can be accomplished simply by not engaging in the action that gives rise to the risk. If you want to avoid the risks associated with the ownership of property or a piece of equipment — do not purchase the asset, but lease or rent it instead; however, it is generally well understood in economics that the greater the risk taken, the greater the potential for return — thus if total risk avoidance were utilized extensively, both individuals and society would suffer.

Retaining risk

Risk retention may be the most common method of dealing with risk. As we mentioned at the beginning of this column, individuals and businesses face an almost unlimited array of risks, and in most cases nothing is done about them because we may see the probability of an event occurring to be very small. Thus, when an individual or firm does not take a positive action to avoid, reduce, or transfer a risk — then that risk is retained. This risk retention may also be conscious or unconscious. Conscious risk retention takes place when the risk is recognized but not transferred or reduced. When the risk is not recognized, it is unconsciously retained. The result in both cases is the same — the risk is retained. Risk retention is a reasonable strategy — firms must decide which risks to retain and which to avoid or transfer based on their margin for contingencies and ability to bear loss.

Transferring Risk

Risk may be transferred from one entity to another, where the other entity is more willing to bear the risk. A great example in the grain industry is the process of hedging, where a farmer or elevator guards against the risk of price changes in one asset by buying or selling another asset whose price changes in an offsetting direction. Risk may also be transferred or shifted through contracts. A “Hold-Harmless” agreement in which an entity assumes another entity’s possibility of loss is an example of such a transfer. For example, a tenant may agree under the terms of a lease to pay any judgments against the landlord which may arise out of the use of the premises. Insurance is a means of shifting or transferring risk (insurance is also an example of “sharing risk” as described below). In consideration of a specific payment (a premium) by one party, a second party contracts to indemnify (pay for hurt, loss or damage) the first party up to a certain limit for the specified loss that may or may not occur.

Sharing risk

Believe it or not, the corporation is one method/tool of sharing risk. In this form of business, the investments of a large number of people are pooled — thus each bears only a portion of the risk that the enterprise may fail. Insurance is another method for dealing with risk through sharing — and in fact it only works if a group of people participate and due to the laws of averages/probabilities that certain events will occur.

Reducing risk

Risk may be reduced in two ways — the first is in preventing or managing loss and the second is in controlling loss should it occur. There are almost no sources of loss where some efforts are not made to avert the loss — these include safety practices and other strategies we will touch on below. Unfortunately, no matter how hard we try, it is impossible to prevent all losses. In addition, in some cases the loss prevention may cost more than the losses themselves. The second method of reducing risk is controlling the severity of loss once it occurs. Examples here are sprinkler or alarm systems.

A Risk Management System

Risk management involves five basic steps:

Identifying risk: Brainstorming sessions initially amongst management and then involving your staff and other employees can allow you to develop lists of possible risks your feed mill or elevator faces.

Measuring the risk: This can involve developing a risk analysis matrix — further discussed below, where you take the risks you have identified in step one above, and simply rate the probability of their occurrence in a “high, medium, low” fashion.

Formulating strategies to limit your risk: As we will discuss in more detail below, management must determine how to address the risks your firm faces. Insurance, contingency plans and education such as safety training are useful tools here.

Carrying out specific tactics to implement your strategies: This step of your risk management plan involves carrying out your plans and putting them to work.

Continuously monitoring your efforts: As with any aspect of management (i.e. strategic planning, human resource management, financial management) — constant monitoring of performance is needed to insure that your strategies are appropriate and are accomplishing the intended goals. This can be especially important with risk management — for example, it is one thing to develop a set of safety protocols/standard operating procedures, it is another thing entirely to make sure these are utilized properly and consistently by your employees.

Risks specific to the feed and grain industry

As with any industry, there are certain risks specific to the grain and feed industry. We cannot list all of the risks you face, but hope to highlight some of the key ones and suggest some possible management strategies. Market risk is faced by firms in any industry, and grain markets face volatility due to weather and associated supply shocks, exchange rates, the vagaries of transportation (fuel prices, etc.) and in recent years the effects of swings in demand for energy as a result of government ethanol legislation as well as other policy interventions. Hedging in the futures market is one strategy for dealing with grain price risk. Effective utilization of numerous and varied information sources is another strategy to deal with market risk, as information helps you manage this type of risk.

Grain quality and/or feed spoilage is another source of risk faced by our industry. Good management here means proper aeration of stocks, grain turns as appropriate, and fumigation for mold or insects (see sidebar). Dust explosions — we all know that grain dust can be dangerous due to its potential for explosion. Thus, good dust suppression practices are a great risk management strategy.

Falls and grain bin suffocation are definite hazards of the grain and feed business. Safety training and enforcement of confined space rules are very important approaches to risk mitigation. Al Tweeten with Berkley Agribusiness Risk Specialists, states in a recent presentation on insurance risk control in the grain industry that focus on safety is perhaps one of the easiest approaches to managing risk and must be a priority. He feels that training should never have a day off and is everybody’s responsibility. As manager, you should give appropriate rewards for following the rules and you should dispense appropriate discipline for breaking them. Creating a culture around safety is important and in general having rules and training is not enough — it just takes a constant effort. OSHA has a reasonably informative page regarding safety in the grain and feed industry, located at: http://www.osha.gov/SLTC/grainhandling

Another risk management topic of current interest and concern is the recently enacted Food Safety Modernization Act signed into law by President Obama on January 4, 2011, which includes some coverage for feed manufacturers (see http://www.fda.gov/Food/FoodSafety/FSMA ), and for which the Food and Drug Administration (FDA) has oversight. Our intent is to devote a future Manager’s Notebook column specifically to dealing with this new law.

Insurance and contingency planning

The most common tool used to manage risk is insurance. Individuals and firms can purchase insurance for almost any situation. Pretty much anything that has a potential risk for loss or damage can be insured. Insurance works as we have mentioned above — funds from policy holders’ premiums are combined into an insurance pool. Insurance companies use statistics to predict what percentage of those insured will actually suffer a loss and file a claim. Claims are then paid from the insurance pool — with the balance accruing to the insurance company as profit.

Contingency plans are strategies your feed or grain business draws up in anticipation of certain events. They can cover any of the risks or possibilities that might occur to your firm: a competitor going out of business, a fire or flood, a product recall or contamination problem, the death or departure of an owner or key employee. How or whether you engage in developing these sorts of plans depends on your view of the severity of the impact of a particular event and the probability of it happening. The important point here is the conversation: it is far better to have considered a potential risk and decided that no action is required, than to not have the conversation and suffer the consequences when something unexpected happens with no contingency plan in place.

Key components of a contingency plan include a response phase focused on a quick and immediate response to an incident, a resumption phase which targets “getting back to work,” a recovery phase which allows for rebuilding critical infrastructure if destroyed by a disaster and finally a restoration phase which implements procedures for normalized operations. A very detailed contingency plan template (meant for Federal Agencies — so some of the parts of the plan will not apply to the grain and feed industry) can be found at: www.csrc.nist.gov/groups/SMA/fasp/documents/contingency_planning/contingencyplan-template.doc.

This plan is worth looking at because it has some good, thought provoking elements such as a “risk analysis matrix,” discussion of contingency plan contact information, an outline of “team staffing and taskings” — who is responsible for what in the event of an emergency — and suggests developing a succinct listing of all vendors and contractors that currently provide support or will provide support in a post-disaster environment, among other components.

Your insurance and your contingency plans are part of your risk management system. Don't just put them in a ‘safe place’ and forget about them however. Make it an annual commitment to review your risk management system and strategy and update it as necessary. No business is a static venture. Involve your employees as much as possible. They, more than anyone, can spot the flaws/gaps in your operation that can be tomorrow's disaster.

Unavoidable yet manageable

There are lots of things that can happen in life and business and while we may not want to think about these negative outcomes and occurrences, it makes good business sense to carefully consider risks and prepare for contingencies. It may be instructive to engage professionals such as an insurance agent or a risk management specialist to assist with your strategies. A well-thought out plan can definitely make your life easier should an unexpected disaster strike. Risk is unavoidable but is manageable.

Feb 28, 2012

How to Manage Financial Risk

Agribusiness has experienced a notable number of upswings in recent years-

Feb 3, 2012

IFEEDER Raises $1 Million

On Jan. 25, at the International Poultry Expo /International Feed Expo in Atlanta, IFEEDER conducted a luncheon to update the media, donors and industry stakeholders about IFEEDER’s progress on its two year anniversary. IFEEDER, The Institute for Feed Education and Research, was launched at IPE/IFE in 2010 with great interest to the U.S. feed and food industries.

The mission of IFEEDER is “To Sustain the Future of Food and Feed Production Through Education and Research.” After two years of existence, it was time we came back and gave an update on the status of our endowment, and more importantly, what projects we have funded to date and how those projects are going. Remember, the need for someone to focus on education or research in our industry is critical. The American Feed Industry Association (AFIA) has its hands full with legislative and regulatory issues — all that it can handle. However, without significant increases in private research and education spending, we will never feed the projected 9.1 billion-plus population projected by 2050. The majority of that demand will come from the United States.

At this year’s luncheon, we shared some new facts. The USDA’s Economic Research Service (ERS) simulations indicate that if U.S. public agricultural R&D spending remains constant (in nominal terms – not adjusting for inflation) until 2050, the annual rate of agricultural TFP* growth will fall to under 0.75% and U.S. agricultural output will increase by only 40% by 2050. By comparison, average TFP growth over the last 50 years was 1.5% annually.

Under this scenario, raising output beyond this level would require bringing more land, labor, capital, materials, and other resources into production, and we know that’s unlikely to happen. Additional agricultural R&D spending will raise U.S. agricultural productivity and output growth. Raising R&D spending by 3.73% annually (offsetting the historical rate of inflation in research costs) would increase U.S. agricultural output by 73% by 2050. Raising R&D spending by 4.73 percent per year (1% annual growth in inflation-adjusted spending) would increase output by 83% by 2050 — in line with the need to double our food production by 2050.

The projects that IFEEDER has sponsored to date will make an impact. Consider the following projects, where IFEEDER has made a total of $195,000 of investments, leveraging another $1.5M of investments to move the research and education needle forward:

  • National Academies’ Nutrient Requirements for Swine (Swine NRC)
  • National Academies’ Nutrient Requirements for Beef (Beef NRC)
  • Funded research to better define the impact of Salmonella and/or other pathogens in feed.
  • Funded research for FAO Life Cycle Assessment (LCA) Model for Livestock.
  • The ABC’s of Farming Coloring Book
  • Adopt-a-Teacher Program to help educate school-aged children about animal agriculture

IFEEDER is very proud to announce that at our luncheon in Atlanta we received another $99,000 in donations to take our total to-date to over $1 million, well on our way to our two-year goal of $1.25 million in total donations. Our sincere ‘thank you’ goes to all those individuals and companies that have agreed to help sustain the future of food and feed production through education and research.

Visit www.ifeeder.org for more information about IFEEDER's education and research goals.

*TFP = Total Factor Productivity, an indicator of technological change and, thus, output.

Dean Warras is the President of Prince Agri Products and the Chair-Elect of IFEEDER. Previously he served as the Vice-Chair for IFEEDER.

Jan 22, 2012

How to Proactively Address Fall Hazards

Protecting workers from fall hazards has always been high on Occupational Safety and Health Administration’s (OSHA) priority list; however, the organization has recently honed in on agriculture’s enforcement — or lack of enforcement — of fall protection-related standards and regulations. Though OSHA’s “four-foot rule,” or general industry standard 29 CFR 1910, requires employees be tied-off or restrained from falling anytime they are four feet off the ground. Agriculture had been exempt under the 1996 Miles Memo, until now.

The internal memo sent by John Miles, OSHA director of compliance programs, to his fellow inspectors regarding OSHA’s enforcement policy. It states that "falls from rolling stock would not be cited under fall protection standard because it was not appropriate to cite exposure to fall hazards from tops of rolling stock unless the stock was inside of or contiguous to a structure where fall protection is feasible."

The memo had been widely accepted as the ruling guideline for the grain processing and handling industries; however, in 2010, OSHA deemed the 1996 memo outdated. OSHA submitted specific questions to industry stakeholders regarding the application and development of fall protection standards for rolling stock.

In response to this inquiry, the National Grain & Feed Association submitted its comments to OSHA, (what did NGFA have to say?), but that's where the discussion ended.

NGFA's director of safety and regulatory affairs, Jess McCluer, likens the vague directive to the complications presented by OSHA’s sweep auger letter of interpretation. Not only has OSHA not clearly stated its expectations, interpretation of the guideline is going to vary with each office, region and inspector.

The question now becomes what constitutes a violation, and what level of rolling stock fall protection is necessary from a contiguous structure?

“It’s causing some confusion within the industry on what's applicable,” says McCluer. “What is the limit on what you can and can't do? Is OSHA saying that you may need fall protection if you are, say, 20 cars away from the facility? We're not sure."

Notable citations

On Oct. 28, 2011, OSHA cited Cooperative Producers Inc., a grain elevator facility in Franklin, Neb., with a proposed $70,000 penalty after citing a willful violation where the employer did not furnish a place of employment which was free of recognized hazards… in that employees were exposed to the hazards of falls when walking/working on the top of railroad cars, or rolling stock.”

According to the OSHA press release, Charles E. Adkins, OSHA's regional administrator in Kansas City, MO, says: "Cooperative Producers failed to provide its employees with a safe and healthful environment. It is imperative that all employers take the necessary steps to eliminate hazards from the workplace."

Another notable citation involves the Federal Grain Inspection Services (FGIS), who cited in October 2011 for lack of fall protection based on an informal employee interview at a Corpus Christi sub-office. The outcome of this action against a government agency may change the policy, impacting the entire industry. {Jess, do you want me to cite the source?}

McCluer explains: “If OSHA issues a citation, and say it is part of the company’s abatement that they agree to do x, y, and z — well, if OSHA is also in the process of potentially developing a new rule regarding rolling stock fall protection, whatever ever they put in as part of that abatement may not comply with the new standard.”

What safeguards or updates can a business proactively put in place to protect itself before the OSHA inspector comes knocking?

“There are a lot of variables involved here,” McCluer says. “It’s not a clear cut issue on what is exactly allowed or not allowed, but they should be OK as long as that they have a sound, safety and health management program.”

McCluer advises facilities thorough recordkeeping of training and equipment purchases; the ability to demonstrate that safety processes and procedures are in place; and how the company reduces the likelihood of fall arrest.

Beyond rolling stock

Trucks, tankers and feed trailers pose their own unique set of safety challenge.

What some grain elevators may fail to realize or choose to ignore is that they responsible for the safety of anyone on their property. In the grain industry, enforcing fall protection standards is difficult given the volume of producer traffic passing through a facility.

“The way OSHA looks at it if a person is above 4 feet, they must be tied off to fall protection,” says Dale Pedersen, senior field technician, Fall Protection Systems. “Elevators deal with very independent people, but they still are liable for whatever happens to those people — doesn’t matter who they are. If a farmer climbs on his truck and falls off, it’s on you.”

Pedersen suggests elevators put signs up everywhere telling people what they can and cannot do while onsite. Signs will not protect a business from liability suits, but they do communicate the facilities rules. Similar to when no smoking signs went up to prevent explosions around dump pits, signage, like those supplied by Clarion Safety Systems (pg. XX), allow a business to approach a customer who may be acting recklessly in a non-confrontational way.

“What it comes down to is that you need to protect the company’s bottom line,” Pederson says. “If someone is breaking your rules, you ask them to obey the rules or leave.”

Protecting your business and your employees

“The cost of the fall protection was much less than a violation,” Pedersen notes.

It’s important for elevators to have procedures in place and know what to do when an inspector shows up. You want to guide OSHA, not open the door to allow them the opportunity to find things.

Checklist of the things you should have in place before an inspection:

1) Observe your employees and your visitors.

Are they climbing on top of their trucks on your property? Are they climbing on top of a railcar? If the answer is yes, then what do you have in place to protect them, to keep them from falling and, secondly, what do you need to do to be in compliance.

2) Don’t be afraid to ask for advice

Call your regional OSHA office, and if you’re nervous about that, use a private phone line or block the call.

“Companies have finally realized that any money they spend on safety is an investment and it's not an expense,” Pedersen says.

Naturally, inviting a fall protection equipment supplier to evaluate the hazards at your facility is an alternate was to gain insight into where improvements can be made.

3) Review the available solutions

Find answers to these questions: What is the most user-friendly? What is going to be the most cost effective over the long term? Trolley roller rail systems are a popular solution. Also, horizontal lifeline or cable systems are traditional option. Also, determine the limited number of people you can put on the system and consider the potential for somebody to get injured if a person falls on the system. Note: A guard rail system is fall prevention, it's not fall protection.

“People try to claim it's that way, but technically it's not,” Pedersen says.

4) Training: Provide an annual refresher to employees

Based off the manufacturer's recommendation, require annual training and inspection of the systems. The small time investment will allow you to document that training was provided should OSHA request documentation in the future.

Jeff Barnum, sales director with Flexible Lifeline Systems, notes the new ANSI Standard, Z359, assists in safety training of employees based on more clearly defined set of training levels and requirements.

“You have the authorized user, who would be the user of the system with a certain level of training required, and then there is the competent person, a position that is a step up from the authorized user,” he explains. “Now we have more defined roles or training requirements with the latest ANSI standards.”

5) Stay informed

Be proactive and seek out the information about changing regulations. Talk to suppliers, trade associations, tune into webinars — and share what you learn.

6) Inform your insurance company of your investment

When you install any safety equipment, call your liability risk carrier and have their representative come out and show them what you've done to eliminate risk.

“We find is typically places see a 10% reduction on their liability coverage,” Pedersen says.

Things to consider

Fall protection equipment manufacturers have come a long way in providing better, more cost-effective systems.

“The technology addressing concerns on rescue, training, system capabilities has come a long way,” Barnum says. “If companies have looked at fall protection in the past and thought it didn’t provide a positive impact on productivity or was cost prohibitive, they really should take a look again and consider some of the newer developments that have come out.”

The highest priority, Barnum explains, is for a facility to eliminate the hazard. Secondly, he suggests companies provide some type of passive fall restraint which would not require the user to tie off.

“The tie off system should be a last resort in any fall protection scenario,” he says. “We certainly look to trying to provide passive solutions or engineering off the hazard. All fall arrest situation is dangerous in itself; you don’t want to rely on the tie-off system as your first line of defense, it should be your back-up, a last resort.”

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Magazine

Marketwatch: Feb, 01

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US Soybean Price Idx: ZSPAUS.CM

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US Hard Red Winter Wheat Price Idx: KEPAUS.CM

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