Tomorrow’s Technology is Here Today: Advanced Grain Management Systems

By: Dennis Gardiner, CPA, Partner|  email

Many factors contribute to a cooperative’s efficiency, not the least of which is the use of technology. The agriculture industry has invested significantly in technology over the years. It is weaved throughout so much of a cooperative’s organization, operations and facility already, where else might it be useful in improving the bottom line?

Emerging technology is helping cooperatives to reduce the cost of shrink, and over a short period of time, lead to a net reduced cost to the bottom line. This technology, known as AGM (Advanced Grain Management), has recently been accepted by some cooperatives that have chosen to automate their grain management decisions. We encourage our clients to invest in agriculture technology where it is appropriate, and while Gardiner Thomsen doesn’t endorse any particular product or brand, we think that this new technology is worth taking a look at.

We were recently introduced to Scott Haugan, President of HOWGAN SCC, the developer of the HOWGAN AMP (Asset Management Plan) and largest US dealer of OPI/Integris Advanced Grain Management system. This AGM system allows cooperatives to proactively monitor and control temperature, airflow and moisture content; prevent lost grain and lost profits due to spoilage, hot spots and over-drying; and help to measure, monitor and manage grain to reduce the impact of shrink while driving down energy costs.

As Scott explained to us, this technology has fully automated monitoring, alarms, and automated aeration controls. His systems are designed to maximize storage profitability by optimizing grain quality, minimizing shrink and spoilage, reducing energy costs and increasing grain dryer throughput. In addition, Scott said that target grain temperature and moisture can be achieved in less time because the system identifies the most effective time to automatically run your fans. The HOWGAN AGM system also detects insects, monitors weather conditions, and monitors grain inventory levels to within a 3% margin of error. Scott also said that cooperatives are able to add this technology to existing bins or to new projects to manage fans and electrical usage.

Since the inherent purpose of purchasing new technology and equipment is to drive improved results and have a positive impact on the bottom line, we wanted to talk with some current users of this technology. We recently spoke with Mark Kistenmacher of Mid-Iowa Coop, a customer of HOWGAN SCC who has invested in Integris AGM. Mark said that he views the purchase of the system as an investment in his facility, and offered his perspective that being on the cutting edge of technology in the agriculture industry is more of a business philosophy for his cooperative. Mark believes in being responsible with his investments and that AGM aligns with his cooperative’s goals.

Randy Dunn, Grain Department Manager at First Coop, said that they began installing the HOWGAN AGM system 5 years ago and now have it at 7 of their locations, built into new projects as well as retrofitted into old ones. First Coop uses the HOWGAN AGM system primarily for temperature and moisture control, but it has also had a great impact on reducing their electrical bill.

He said, “Our electrical usage is on a demand meter, so we pay a higher rate during peak usage. With (AGM) we don’t have to run our fans at those peak times, and that’s been a pretty big savings for us.”

We asked Scott Haugan how people are accepting this new technology, which can change the paradigm from simply accepting shrink to proactively managing it. He said that early adopters, like Mark Kistenmacher, are present. Out of the top 20 cooperatives, who have over 400 locations, HOWGAN has 12% of the facilities now measuring and managing their temperature and moisture to drive improved results. These early adopters have equipment paid for with savings, before others are willing to change their status quo.

When asked about status quo, Mark Kistenmacher said, “Status quo is unacceptable once you realize that your investment will drive a significant ROI. Avoiding change is no longer acceptable when you realize that investing today drives improved results today”.

But is “today” the right time for your coop to invest in technology improvements? Cooperatives should also consider the time investment necessary for training staff on how to use such advanced technology.

Dave Holm, Executive Director of the Iowa Institute for Cooperatives, described his introduction to the HOWGAN AGM system; “I met with Scott Haugan in January to learn more about it. Once we got talking about what this thing can do, I thought… Oh my goodness! We’re going from riding bicycles to flying jet airplanes! This is truly a loaded up system.”

Dave commented that this is a very sophisticated grain management system. He thinks the industry will move toward it over time, but he’s not certain that every cooperative is prepared to do this today. A great deal of training is necessary to fully utilize all the functions this system can perform.

“The ironic thing is, a lot of times, once you incorporate that technology and learn how to run it, it’s actually easier than the way we were doing it. But it’s just the idea of learning how to run it that might be the issue.” Dave said. He still suggests that every coop should at least learn about what the Integris AGM system can do, but make their own decisions about whether it’s right for their coop, and if it’s the right time.

Moving beyond time constraints, another obstacle HOWGAN SCC has encountered is that some grain elevators are concerned about not having “money in the budget” as they spec out a project. With a supposed 18 month ROI potential, the decision to invest in this new technology could be more of a cash flow concern rather than an “expense vs. investment” concern. It also could depend on the cooperative’s business philosophy regarding emerging technology.

So, we’d like to ask our clients– do you consider technology improvement to be a budgeted expense, or long-term investment? What other factors do you take into consideration when making improvements to your facilities? As I mentioned before, while we don’t endorse any particular product or brand regarding AGM, we are very curious about it and encourage our clients to take a closer look to see if it would be a benefit to them. We would also be happy to talk with you about AGM and to see how it might potentially impact your bottom line.