Author: Susan Wood Gay, Assistant Professor and Extension Engineer, Biological Systems Engineering Department; and Robert "Bobby" Grisso, Professor and Extension Engineer, Biological Systems Engineering Department; Virginia Tech.
Publication Number 442-760, May 2002
A farm storage building is a good investment for many agricultural operations. The building can be used to store hay, machinery, or both. As a result, the value of these commodities will be worth more than if left in the field. However, does the increased value of stored hay or machinery offset the cost of owning a building? The following discussion examines the costs and savings of owning a farm storage building.
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| Example 1. Calculate the estimated cost of an open-sided barn that is 100 feet long and 50 feet wide.
100 feet x 50 feet = 5,000 square feet 5,000 square feet x $4.00/square feet = $20,000 |
To evaluate the feasibility of constructing a storage barn, the initial building cost must be converted into an annual cost. The annual cost of barn storage includes depreciation, interest on investment, repairs, taxes, and insurance. Table 1 shows how to calculate the annual cost of storage for the barn described in Example 1. You can enter your figures to estimate the cost of storage for your barn.
Depreciation is the cost associated with wear and tear on the building. Most farm buildings have a useful life of 20 years. The annual cost of depreciation1 is found by dividing the initial building cost by the anticipated years of useful life of the building. Therefore, the annual cost of depreciation for the barn in Example 1 is $1,000 ($20,000 / 20 years).
Interest on investment is the cost of borrowing money or, if the money is not borrowed, the money that could have been earned in interest if invested. For convenience, assume the interest on investment is equal to 2/3 of the current annual interest rate. Interest on borrowed money ranges from about 8.0 to 10.0 percent. Therefore, interest on investment has a range of 5.3 to 6.7 percent. Assuming an interest rate of 9.0 percent for the example barn, the annual cost of interest on investment is $1,200 (2/3 x 0.09 x $20,000).
Repairs, taxes, and insurance on the storage building are normally figured at 0.70 percent, 1 percent and 0.30 percent of initial cost, respectively, or a total of 2.0 percent. Therefore, the annual cost for these factors is $400 (0.02 x $20,000).
The total annual cost of a storage barn is the sum of the annual costs for depreciation, interest on investment, repairs, taxes, and insurance. For the barn in Example 1, the annual cost of barn storage is $2,600. However, to determine if barn storage is economical, the annual cost of storage needs to be compared to the benefit (income) of barn storage.
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The reduction in dry matter losses caused by storing hay in a building often results in increased savings. To illustrate this, two examples are given that calculate the value of large round bales stored in a building and unprotected on the ground.
| Example 2. Large round hay bales are stored in the barn described in Example 1. Barn vertical clearance is 14 feet. The 1,000 - lb bales are 5 feet in diameter and 4 feet wide. Bales are stacked vertically in a pyramid pattern (Figure 1). A total of 408 bales or 204 tons of hay (408 bales x 0.5 tons/lb) can be stored in the barn. Value of the hay is $65 per ton of dry matter. Hay dry matter content is 85 percent. Determine the value of hay stored in the barn and the net annual savings for barn storage (Table 3). |
Hay value is based on dry matter content. A total of 173 tons (0.85 x 204 tons) of dry matter are stored in the barn in Example 2. Therefore, the value of hay stored in the barn is $11,245 ($65/ton x 173 tons). Net annual value is calculated by subtracting the annual cost of the building ($2,600) from the benefit of barn storage ($11,245). For Example 2, the net annual value is $8,645.
| Example 3. The same large round hay bales described in Example 2 are stored unprotected on the ground. The tonnage and value of the hay are the same. Hay dry matter content is 57 percent. Determine the value of hay stored unprotected on the ground (Table 4). |
The amount of dry matter stored on the ground is 116 tons (0.57 x 204 tons). Therefore, the value of hay stored on the ground is $7,540 ($65/ton x 116 tons). Since there is no annual cost of a storage barn, the net annual value for unprotected ground storage is $7,540.
The net annual value of storing hay in a barn is $8,645 as compared to the $7,540 value resulting from storing hay on the ground. Therefore, a total $1,105 is saved by barn storage. However, these savings are a conservative estimate that does not consider the added advantage of using the building for other purposes.
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In most cases, the economic benefits from storing machinery and equipment are much greater than the cost of the storage. The following example shows the annual savings for storage of selected equipment.
| Example 4. Two 100-horse power tractors, a combine, a cotton picker, and a hay baler (round) are stored in the barn described in Example 1. The initial cost of each piece of machinery is $50,000 (per tractor), $100,000, $165,000, and $15,000, respectively. After five years, the equipment is traded in at 50.0 percent of its original value. The annual savings on storing the equipment is 3.0 percent of its trade-in value. Determine the net annual savings of barn storage of the machinery (Table 6). |
The initial cost of the equipment is $380,000. At trade-in, the value of the equipment is $190,000 (0.50 x $380,000). Therefore, the total annual savings on barn storage of the equipment is $5,700 (0.03 x $190,000). The net annual savings is the total annual cost of the building ($2,600) subtracted from the total annual savings on barn storage of the equipment ($5,700) or $3,100. However, this is a conservative estimate considering that additional savings can be expected from reduced machinery down time. For additional details on the savings of stored machinery, see VCE Publication 442-451, Five Strategies for Extending Machinery Life.
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Some building sizes work better than others for round bale storage. Building dimensions are usually exterior measurements. However, a 50-foot wide building will not provide adequate space for ten 5-foot diameter bales placed side by side. Building height is another important consideration for hay storage. Interior building height should be at least 2 feet higher that the height of stacked bales. Note that sidewalls must be built to withstand the horizontal pressures from each row of bales.
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Planning for a machinery storage building also requires careful consideration of the estimated floor space requirements for the stored machinery. The floor space required for each particular item to be stored depends on a number of factors including fold-up configuration and whether or not implements remain hitched to machinery (Figures 2 - 4).
To determine minimum total storage area: 1) use actual area dimensions for current equipment and for machinery that may be purchased in the future (Table 8); 2) sum the areas of all items to be stored; and 3) multiply the total area by 1.15 to account for space between equipment.
The minimum requirement for floor space is merely a starting point for sizing the building. This floor space requirement may account for future storage needs, but does not consider overnight or short-term storage needs when it would be desirable to leave implements hitched to tractors. During such times, these units may have to be left outside or stored elsewhere unless planned for in the original design.
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Ely, L.C. 1984. The quality of stored round hay bales or how much of your hay bale is left to feed. Georgia Dairyfax. January 1984. Animal and Dairy Science Department, University of Georgia, Athens, GA.
Hoveland, C.S., J.C. Garner, and M.A. McCann. 1997. Does it pay to cover hay bales? The Georgia Cattleman, July, 1997, pp. 9-10.
Meador, N. 1981. Spend 35% of equipment investment for storage. Farm Building News, Sept. 1981. p. 56.
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Machine Shed: 40' x 104', MWPS-74143 - 13 ft height clearance with 40' x 40' shop
Machine Shed: 48' x 96', MWPS-74146 - 14 ft height clearance with 48' x 40' shop
Machine Shed: 60' x 96', MWPS-74147 - 14 ft height clearance with 60' x 40' shop
Machine Shed: 30' x 72', MWPS-74148 - 12 ft height clearance with 30' x 40' shop
Machine Shed: 56' x 88', MWPS-74149 - 13 ft height clearance, no shop included, 40' clear span with a 16' shed attached for addition space.
To order MWPS publications, contact MidWest Plan Service, 122 Division Hall, Iowa State University, Ames, IA 50011 - 3080, 1-800-562-3618, www.mwpshq.org
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Hofman, V. and K. Hellevang. 1994. Planning Farm Shops. AE-1066, North Dakota State University Extension Service, Fargo, ND.
Worley, J. and W.D. Givan. 1999. Economics of Farm Storage Buildings. Bulletin 1173, University of Georgia Cooperative Extension, Athens, GA.
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