Grain Elevator & Commodity Storage: USDA B&I Industry Credit Analysis

Industry Risk Ratings

Overall Industry Risk Profile

Composite Score: 3.72 / 5.00 → Elevated-to-High Risk

The 3.72 composite score places Farm Product Warehousing and Storage (NAICS 493130) in the elevated-to-high risk category, meaning enhanced underwriting standards, tighter covenant structures, lower leverage limits, and active portfolio monitoring are warranted for all credits in this sector. The score sits meaningfully above the all-industry average of approximately 2.8–3.0, reflecting the combination of commodity price pass-through revenue, thin net profit margins, binary trade policy exposure, and a documented pattern of small-to-mid-size operator bankruptcies since 2019. Compared to structurally similar industries — Refrigerated Warehousing and Storage (NAICS 493110) at an estimated 2.9 and General Warehousing and Storage (NAICS 493190) at approximately 2.6 — grain elevator operations are substantially riskier for credit purposes due to commodity exposure, regulatory complexity, and weather-driven revenue variability.^[30]

The two highest-weight dimensions — Revenue Volatility (4/5) and Margin Stability (5/5) — together account for 30% of the composite score and contribute 1.35 weighted points alone. These scores reflect an observed industry revenue standard deviation of approximately 12–15% annually over the 2019–2024 period, with a peak-to-trough swing of 20.7% between the 2022 revenue peak ($7.48 billion) and the 2023 trough ($6.92 billion). Net profit margins of 1.5–4.5% (median 2.8%) represent one of the thinnest margin profiles across all warehousing sub-sectors, implying operating leverage of approximately 3.5x — meaning DSCR compresses approximately 0.35x for every 10% revenue decline, a compression rate that can push a median-DSCR borrower (1.25x) below the 1.10x covenant floor within a single adverse crop year.^[1]

The overall risk profile is deteriorating on a 5-year trend basis: five of ten dimensions show rising (↑) risk scores versus two years ago, driven by worsening trade policy uncertainty, accelerating industry consolidation, and sustained elevated interest rates that increase inventory carry costs. The most concerning trend is Margin Stability (↑ from 4/5 to 5/5) due to the simultaneous compression from elevated short-term borrowing costs, record grain surplus suppressing basis revenue, and farmer financial stress raising counterparty credit risk on deferred payment arrangements. The documented failures of multiple small-to-mid-size independent grain elevator operators across the Mid-South and Great Plains since 2019 — including USDA FGIS license revocations and Chapter 7 filings — directly validate the elevated Margin Stability and Competitive Intensity scores and provide empirical confirmation that the risk rating is not theoretical.^[31]

Industry Risk Scorecard

Industry Risk Scorecard — Weighted Composite with Peer Context — NAICS 493130, Farm Product Warehousing and Storage^[30]

Risk Dimension	Weight	Score (1–5)	Weighted Score	Trend (5-yr)	Visual	Quantified Rationale
Revenue Volatility	15%	4	0.60	↑ Rising	████░	5-yr revenue std dev ≈13%; peak-to-trough 2022–2023 = –7.5%; commodity price beta drives above-median cyclicality vs. warehousing peers
Margin Stability	15%	5	0.75	↑ Rising	█████	Net margin range 1.5%–4.5% (median 2.8%); basis trading losses can eliminate annual profit entirely; elevated carry costs (Prime + 1.5–3.0%) compress merchandising spreads
Capital Intensity	10%	4	0.40	→ Stable	████░	Capex/Revenue ≈8–12%; concrete silos $15–25/bu replacement cost; sustainable Debt/EBITDA ceiling ~3.5–4.5x; OLV ≈50–65% of appraised value
Competitive Intensity	10%	4	0.40	↑ Rising	████░	Top-4 firms (Cargill, ADM, Bunge, LDC) control ~55% of capacity; Bunge-Viterra merger (2024) intensifies origination pressure; HHI low at country elevator level but oligopolistic at terminal level
Regulatory Burden	10%	3	0.30	↑ Rising	███░░	Compliance costs ≈1.5–2.5% of revenue; USDA Warehouse Act bonding + OSHA 29 CFR 1910.272 + FDIC climate risk guidance (RIN 3064-ZA32, 2022) adding incremental burden; framework established but expanding
Cyclicality / GDP Sensitivity	10%	4	0.40	→ Stable	████░	Revenue elasticity to GDP ≈1.8–2.2x (amplified by commodity price multiplier); 2008–2009 revenue decline ≈15–18%; trade policy shocks create non-GDP cyclicality layer
Technology Disruption Risk	8%	2	0.16	→ Stable	██░░░	On-farm storage is the primary disruptor; growth of on-farm capacity has stalled (80% utilization as of Dec 2025); digital grain marketing platforms growing but not yet disintermediating elevators at scale
Customer / Geographic Concentration	8%	4	0.32	→ Stable	████░	Country elevators serve 15–30 mile trade areas; single-crop-year weather events can reduce throughput 30–60%; farmer counterparty concentration risk elevated in 2025–2026 trade war environment
Supply Chain Vulnerability	7%	3	0.21	→ Stable	███░░	Input supply risk low (grain is sourced locally); export channel risk high — 50–60% of corn/soybean production exported; rail/barge disruptions directly impair basis and throughput revenue
Labor Market Sensitivity	7%	3	0.21	↑ Rising	███░░	Labor ≈18–25% of operating costs; rural labor markets structurally tight; harvest-season staffing risk acute; wage growth +4–6% annually 2022–2025 vs. ≈3.5% CPI; key-person risk significant at independent elevators
COMPOSITE SCORE	100%		3.75 / 5.00	↑ Rising vs. 3 years ago		Elevated-to-High Risk — approximately 70th–75th percentile vs. all U.S. industries

Score Interpretation: 1.0–1.5 = Low Risk (top decile); 1.5–2.5 = Moderate Risk (below median); 2.5–3.5 = Elevated Risk (above median); 3.5–5.0 = High Risk (bottom decile)

Trend Key: ↑ = Risk score has risen in past 3–5 years (risk worsening); → = Stable; ↓ = Risk score has fallen (risk improving)

Detailed Risk Factor Analysis

1. Revenue Volatility (Weight: 15% | Score: 4/5 | Trend: ↑ Rising)

Scoring Basis: Score 1 = revenue std dev <5% annually (defensive); Score 3 = 5–15% std dev; Score 5 = >15% std dev (highly cyclical). This industry scores 4 based on observed revenue standard deviation of approximately 12–15% annually over 2019–2024, with a coefficient of variation of approximately 0.14 — placing it in the elevated-risk tier, one step below the highest volatility classification.^[1]

Historical revenue growth ranged from –7.5% (2022–2023 commodity price retreat) to +18.0% (2021–2022 commodity price surge), with the peak-to-trough swing of $560 million between the 2022 peak ($7.48 billion) and the 2023 trough ($6.92 billion) occurring within a single calendar year. This volatility is structurally amplified by the fact that a meaningful portion of revenue is commodity price pass-through rather than fee-based — when corn prices declined from $6.50/bu to $4.20/bu between 2022 and 2024, the absolute dollar value of grain handled fell even when bushel volumes were stable. In the 2008–2009 recession, grain elevator revenues declined an estimated 12–18% peak-to-trough (vs. GDP decline of approximately 4.3%), implying a cyclical beta of approximately 3.0–4.2x — substantially above the warehousing sector average. Recovery from that trough took approximately 6–8 quarters, slower than the broader economy's 4–5 quarter recovery. Forward-looking volatility is expected to remain elevated or increase based on renewed trade policy uncertainty, record grain surplus conditions creating basis compression, and the binary nature of export market access risk.

2. Margin Stability (Weight: 15% | Score: 5/5 | Trend: ↑ Rising)

Scoring Basis: Score 1 = EBITDA margin >25% with <100 bps annual variation; Score 3 = 10–20% margin with 100–300 bps variation; Score 5 = <10% margin or >500 bps variation. Score 5 is assigned based on net profit margins of 1.5–4.5% (median 2.8%) and the structural inability to sustain margins under commodity price or throughput stress — this is the single most consequential risk dimension for grain elevator credit analysis.^[30]

The industry's approximately 65–70% fixed cost burden (facility depreciation, debt service, base labor, insurance, regulatory compliance) creates operating leverage of approximately 3.5x — for every 1% revenue decline, EBITDA falls approximately 3.5%. Cost pass-through rate is limited: elevators can pass through commodity price changes to farmers (who receive the prevailing cash price), but storage and handling fee margins are highly competitive and difficult to increase unilaterally. The critical margin risk is basis trading: elevators that take merchandising positions earn the spread between the local cash price and the CBOT futures price (the "basis"), and this spread can collapse or invert during trade disruptions, drought years, or transportation bottlenecks — producing losses that can exceed an entire year's storage fee income. The multiple independent elevator bankruptcies documented since 2019 — including USDA FGIS license revocations following inability to meet storage obligations — all exhibited net margins below 1.5% in the 12–24 months preceding failure, validating this as the structural floor below which debt service becomes mathematically unviable. The current 2025–2026 environment of record corn surplus, elevated borrowing costs (Bank Prime Loan Rate above 7.5%), and trade-war-driven basis compression has pushed this dimension's score from 4 to 5.^[32]

3. Capital Intensity (Weight: 10% | Score: 4/5 | Trend: → Stable)

Scoring Basis: Score 1 = Capex <5% of revenue, leverage capacity >5.0x; Score 3 = 5–15% capex, leverage ~3.0x; Score 5 = >20% capex, leverage <2.5x. Score 4 based on annual capex of approximately 8–12% of revenue and implied sustainable leverage ceiling of approximately 3.5–4.5x Debt/EBITDA at current margin levels.

Annual capital expenditure for a typical country elevator ranges from $200,000 to $1.5 million, depending on facility size and age, with maintenance capex representing approximately 5–7% of revenue and growth capex an additional 2–5% for operators pursuing throughput expansion. The U.S. Grain Storage Silos Market — valued at approximately $310.10 million in 2026 and growing at a 4.20% CAGR — reflects ongoing but moderate capital reinvestment across the sector, with key equipment suppliers including AGI, Tornum, and SKIOLD.^[33] Equipment useful life varies significantly: concrete slip-form silos have 50–75 year useful lives but limited alternative-use value, while steel bins depreciate over 20–30 years with better salvage markets, and dryers and conveyors have 10–15 year lives. Orderly liquidation value of specialized grain elevator assets averages 50–65% of appraised value due to rural location, agricultural-only functionality, and limited comparable sales — a critical constraint on collateral adequacy. Sustainable Debt/EBITDA at this capital intensity and margin profile: 3.5–4.5x for well-managed operators, with the lower end appropriate for independent country elevators lacking merchandising diversification.

4. Competitive Intensity (Weight: 10% | Score: 4/5 | Trend: ↑ Rising)

Scoring Basis: Score 1 = CR4 >75%, HHI >2,500 (oligopoly); Score 3 = CR4 30–50%, HHI 1,000–2,500 (moderate competition); Score 5 = CR4 <20%, HHI <500 (highly fragmented, commodity pricing). Score 4 based on the dual market structure: oligopolistic at the terminal/export level (top 4 firms controlling ~55% of total industry capacity) but highly fragmented and intensely competitive at the country elevator level where most USDA B&I and SBA 7(a) borrowers operate.

The top-four players — Cargill (~16.8% market share), ADM (~18.5%), Bunge (~14.2%), and Louis Dreyfus (~5.2%) — collectively control approximately 55% of industry capacity and command meaningful pricing advantages through scale, transportation infrastructure, and global merchandising networks. The completed Bunge-Viterra merger in late 2024 — one of the largest agribusiness consolidations in decades — has further concentrated origination reach in the Northern Plains and Pacific Northwest, directly intensifying competitive pressure on independent and cooperative elevators in those geographies.^[34] At the country elevator level where USDA B&I borrowers compete, the market is highly fragmented with approximately 4,800 facilities, but competitive pressure from large operators' satellite facilities and digital origination platforms is intensifying. The documented bankruptcies of smaller independent operators since 2019 concentrated precisely in markets where large multinational and cooperative competitors had expanded origination networks — confirming that mid-market operators without defensible origination territories face the highest competitive pressure. Competitive intensity score is expected to remain at 4 or increase to 5 by 2028 as consolidation accelerates.

5. Regulatory Burden (Weight: 10% | Score: 3/5 | Trend: ↑ Rising)

Scoring Basis: Score 1 = <1% compliance costs, low change risk; Score 3 = 1–3% compliance costs, moderate change risk; Score 5 = >3% compliance costs or major pending adverse change. Score 3 based on current compliance cost burden of approximately 1.5–2.5% of revenue and a regulatory framework that is established but expanding.

Key regulators include USDA Agricultural Marketing Service (USDA Warehouse Act licensing and bonding), OSHA (grain handling standard 29 CFR 1910.272 — grain dust explosion prevention), EPA (environmental compliance for fumigants and underground storage tanks), and state grain dealer licensing authorities in all major grain-producing states. USDA bond requirements — including USDA Warehouse Act bonds and state grain dealer bonds — represent a meaningful compliance cost and a critical monitoring point for lenders, as documented by the surety bond requirements applicable to all federally licensed grain warehouses.^[35] The trend score is rising due to the FDIC's June 2022 Statement on Principles for Climate-Related Financial Risk Management (RIN 3064-ZA32), which explicitly referenced grain storage facilities and signals increasing regulatory expectation for both lenders and borrowers to formally assess and document climate-related risks — an incremental compliance burden that will add an estimated 0.2–0.5% of revenue in administrative costs for operators subject to regulated lender oversight.^[36] Approximately 70–75% of operators are already in compliance with core USDA and OSHA requirements; the remaining 25–30% face implementation pressure, particularly smaller independent facilities with aging infrastructure.

6. Cyclicality / GDP Sensitivity (Weight: 10% | Score: 4/5 | Trend: → Stable)

Scoring Basis: Score 1 = Revenue elasticity <0.5x GDP (defensive); Score 3 = 0.5–1.5x GDP elasticity; Score 5 = >2.0x GDP elasticity (highly cyclical). Score 4 based on observed revenue elasticity to GDP of approximately 1.8–2.2x over 2019–2024, reflecting both direct GDP sensitivity and the additional commodity price and trade policy amplification layer that makes this industry more cyclical than its GDP beta alone would suggest.

In the 2008–2009 recession, grain elevator revenues declined an estimated 12–18% peak-to-trough (GDP: –4.3%; implied elasticity 2.8–4.2x), with a U-shaped recovery pattern requiring approximately 6–8 quarters to restore prior revenue levels — slower than the broader economy's 4–5 quarter recovery. The current GDP growth environment of approximately 2.5–3.0% (2025–2026) is supportive, but the industry's non-GDP cyclicality drivers — trade policy, crop production variability, and commodity price cycles — can produce severe revenue dislocations entirely independent of macroeconomic conditions, as demonstrated by the 2018–2019 U.S.-China trade war, which reduced Chinese soybean purchases by an estimated $12–14 billion annually and suppressed Midwest elevator throughput and basis without any corresponding GDP recession.^[37] This beta is higher than peer industries including Refrigerated Warehousing (estimated 1.2–1.5x) and General Warehousing (estimated 0.8–1.2x). Credit implication: In a –2% GDP recession combined with trade policy disruption, model industry revenue declining approximately 15–25% with a 2–3 quarter lag — stress DSCR accordingly to a minimum 1.0x floor.

7. Technology Disruption Risk (Weight: 8% | Score: 2/5 | Trend: → Stable)

Scoring Basis: Score 1 = No meaningful disruption threat; Score 3 = Moderate disruption (next-gen tech gaining but incumbent model remains viable for 5+ years); Score 5 = High disruption (disruptive tech accelerating, incumbent models at existential risk within 3–5 years). Score 2 reflects that the primary technology disruption threat — on-farm storage expansion — has materially stalled, reducing near-term risk, while digital grain marketing platforms represent a medium-term but not imminent disintermediation risk.

The most consequential technology disruption to commercial grain elevators has been the decades-long expansion of on-farm storage capacity, which allowed

Diligence Questions & Considerations

Industry Failure Mode Analysis

The following table summarizes the most common pathways to borrower default in grain elevator lending based on documented historical distress events. The diligence questions below are structured to probe each failure mode directly.

Common Default Pathways in Farm Product Warehousing & Storage — Historical Distress Analysis (2019–2026)^[29]

Failure Mode	Observed Frequency	First Warning Signal	Average Lead Time Before Default	Key Diligence Question
Unhedged Inventory / Commodity Price Collapse	High — primary trigger in majority of documented elevator bankruptcies	Grain line drawn to maximum capacity for 60+ consecutive days outside harvest season; futures margin call frequency increasing	3–9 months from signal to default	Q2.4 (Input Cost / Commodity Exposure)
Throughput Volume Collapse / Local Crop Failure	High — drought years (2012, 2022–2023) produced widespread volume shortfalls	Bushels received YTD more than 20% below same-period prior year for two consecutive months	6–18 months (seasonal lag before debt service impact)	Q1.1 (Throughput Utilization)
Grain Line Non-Renewal / Liquidity Freeze	Medium — increasing frequency as regional banks tighten agricultural credit	Grain line lender requesting additional collateral or covenant modifications at renewal; delayed renewal discussions	2–6 months (concentrated around harvest season)	Q2.5 (Capital Structure / Hidden Liabilities)
USDA License Revocation / Regulatory Failure	Medium — typically follows 12–24 months of financial stress-driven compliance deterioration	USDA inspection deficiency notices; delayed bond premium payments; storage receipt discrepancies	6–18 months from first inspection deficiency to license action	Q3.1 (Core Operations / Regulatory Compliance)
Commingling Fraud / Storage Receipt Shortfall	Low frequency but catastrophic loss severity — total collateral impairment common	Discrepancies between scale tickets and bin inventory; unusual grain line draw patterns; farmer complaints about delayed settlement	Often discovered suddenly — no reliable lead time; fraud conceals deterioration	Q6.1 (Collateral / Inventory Verification)
Overexpansion / Debt Service Trap	Medium — common among operators who expanded during 2010–2014 commodity price boom	Debt service consuming >85% of operating cash flow; capex funded from grain line rather than term debt	12–36 months from expansion completion to distress	Q1.5 (Growth Strategy / Capital Requirements)

I. Business Model & Strategic Viability

Core Business Model Assessment

Question 1.1: What is the elevator's annual throughput volume in bushels handled, how does it compare to rated storage capacity, and what has been the trend over the past five years?

Rationale: Throughput volume — total bushels received, dried, stored, and shipped annually — is the single most predictive operational metric for grain elevator revenue adequacy. Industry benchmarks indicate that well-managed country elevators turn their storage capacity 2.5–4.0 times annually; facilities turning capacity fewer than 1.5 times are generating insufficient handling fee and storage income to cover fixed operating costs and debt service. Multiple documented elevator bankruptcies since 2019 involved operators whose throughput had declined 15–25% over three years while management continued projecting recovery in plans submitted to lenders — a pattern that must be challenged with historical data.^[29]

Key Metrics to Request:

• Annual bushels received, stored, and shipped — trailing 5 years by crop year: target capacity turns ≥2.5x, watch <2.0x, red-line <1.5x
• Monthly throughput by commodity (corn, soybeans, wheat, sorghum) — trailing 36 months to reveal seasonality and trend
• Rated storage capacity (bushels) by facility and structure type (concrete slip-form, steel bins) versus actual peak inventory held
• Drying volume and average moisture reduction per bushel — revenue-generating metric for dryer operations; target ≥0.5 points moisture reduction per bushel at harvest
• Handling fee revenue per bushel: industry median approximately $0.04–$0.08/bushel for country elevators; below $0.03/bushel indicates pricing pressure or volume mix issues

Verification Approach: Request USDA Federal Grain Inspection Service (FGIS) scale ticket summaries for the past three years — these are third-party verified records of grain received and cannot be easily manipulated. Cross-reference against drying fuel consumption records (propane/natural gas invoices correlate directly with drying volume). Compare stated throughput to rail car orders and barge shipment records if the facility is rail- or barge-served. Request grain line utilization history from the grain line lender — peak seasonal draws correlate with throughput volume and provide an independent check.

Red Flags:

• Throughput volume declining more than 10% year-over-year for two consecutive crop years without documented weather explanation
• Capacity utilization below 60% of rated storage during peak harvest period — indicates loss of origination territory to competitors or on-farm storage
• Handling fee revenue per bushel declining while management reports stable volumes — suggests fee compression from competitive pressure
• Significant variance between management-reported throughput and FGIS scale ticket records
• Throughput volume heavily concentrated in a single commodity (>80% corn or >80% soybeans) without diversification — amplifies single-crop weather risk

Deal Structure Implication: If trailing 3-year average throughput is below 2.0x capacity turns, require a minimum throughput covenant of 1.75x capacity turns tested annually, with a cash sweep provision directing 50% of distributable cash to principal paydown if throughput falls below 1.5x for two consecutive crop years.

---

Question 1.2: What is the revenue mix between fee-based storage and handling income versus merchandising (basis trading, grain origination) income, and how stable is each component?

Rationale: Fee-based storage and handling revenue — earned from receiving, storing, drying, and shipping grain on behalf of farmers and commercial customers — is substantially more predictable and lender-friendly than merchandising income, which is derived from basis positions, futures trading, and commodity price speculation. Industry data shows that top-quartile operators generate 60–70% of revenue from fee-based services, while bottom-quartile operators rely on merchandising for 50%+ of revenue, creating earnings volatility that can swing ±40% in a single marketing year. Merchandising income is operationally legitimate and can be highly profitable, but it introduces mark-to-market risk that can destroy equity in a commodity price dislocation.^[30]

Key Documentation:

• Revenue breakdown by category: storage fees, handling fees, drying fees, merchandising income, input sales (if applicable) — trailing 36 months
• Merchandising P&L detail: gross trading gains/losses by crop year, including realized and unrealized positions
• Average storage fee rate per bushel per month: industry range $0.005–$0.012/bushel/month; below $0.004 indicates competitive fee compression
• Grain bank volume (grain held on behalf of farmers for deferred sale): size of deferred payment obligations and aging
• Input supply revenue (fertilizer, seed, chemicals) if applicable — provides revenue diversification and farmer relationship stickiness

Verification Approach: Request the elevator's grain position report for the past three crop years — this shows actual merchandising positions held, hedge ratios, and realized gains/losses. Cross-reference merchandising income against CBOT price movements for the same periods to assess whether the borrower is a disciplined hedger or a speculative trader. Request the Board-approved trading limits policy and verify it is actually being followed through position reports.

Red Flags:

• Merchandising income exceeding 50% of total revenue without a documented, Board-approved risk management policy
• Merchandising income highly variable (±30% year-over-year) suggesting speculative rather than hedged positioning
• Grain bank obligations (deferred payment to farmers) exceeding 20% of total grain line capacity — creates liquidity concentration risk
• No separation between storage/handling fee revenue and merchandising income in management reporting — inability to isolate predictable revenue base
• History of merchandising losses in any single crop year exceeding 12 months of fee-based revenue

Deal Structure Implication: Structure the debt service coverage covenant to be tested against fee-based revenue only (excluding merchandising income) to ensure the predictable revenue base covers debt obligations; merchandising income should be treated as upside, not required for debt service.

---

Question 1.3: What are the actual unit economics per bushel handled — including all revenue components and direct costs — and do they support debt service at the proposed leverage level?

Rationale: The fundamental unit economics of a grain elevator — revenue per bushel minus direct cost per bushel — determine whether the facility can generate adequate cash flow at any given throughput volume. Industry median net margin per bushel handled ranges from $0.012 to $0.025 for country elevators with diversified services; facilities below $0.008 per bushel net margin are structurally unable to service term debt at typical leverage ratios. Operators who expanded capacity during the 2010–2014 commodity price boom often modeled unit economics based on peak throughput assumptions that proved 20–30% optimistic — a projection gap that made debt service impossible within 24–36 months of facility completion.^[29]

Critical Metrics to Validate:

• Total revenue per bushel handled: target ≥$0.08/bushel (including all fee and merchandising components); watch <$0.06/bushel
• Direct operating cost per bushel: labor, energy (drying fuel), utilities, maintenance — industry median approximately $0.04–$0.06/bushel
• Net operating margin per bushel: target ≥$0.015/bushel; red-line <$0.008/bushel
• Breakeven throughput volume at current cost structure and proposed debt service: calculate the minimum bushels required to cover all fixed costs plus annual debt service
• Sensitivity: DSCR impact of a 20% throughput volume reduction (analogous to a moderate drought year)

Verification Approach: Build the unit economics model independently from the income statement and throughput volume records — do not anchor to the borrower's model. Divide total revenue by total bushels handled to derive revenue per bushel, then divide total direct operating expenses by total bushels to derive cost per bushel. Reconcile the resulting net margin per bushel to actual reported EBITDA. If the reconciliation does not close within 5%, investigate the gap before proceeding.

Red Flags:

• Net margin per bushel below $0.010 in the trailing crop year — mathematically insufficient to service term debt at typical leverage
• Breakeven throughput volume exceeding 85% of historical average throughput — no cushion for adverse weather or trade disruption
• Unit economics improving in management projections without a specific, verifiable operational change to justify the improvement
• Drying cost per bushel significantly above regional peers — may indicate aging or inefficient dryer equipment requiring near-term capital replacement
• Revenue per bushel declining over trailing three years while management reports stable operations

Grain Elevator Credit Underwriting Decision Matrix — NAICS 493130^[29]

Performance Metric	Proceed (Strong)	Proceed with Conditions	Escalate to Committee	Decline Threshold
Annual Capacity Turns (Throughput / Storage Capacity)	≥3.0x	2.0x–3.0x	1.5x–2.0x	<1.5x — fixed costs cannot be covered at this throughput level
DSCR (Trailing 12 Months, Fee-Based Revenue Only)	≥1.45x	1.25x–1.45x	1.10x–1.25x	<1.10x — no exceptions; debt service mathematically at risk
Net Profit Margin	≥4.0%	2.5%–4.0% (industry median range)	1.5%–2.5%	<1.5% — insufficient buffer against throughput or margin compression
Fee-Based Revenue as % of Total Revenue	≥65%	45%–65%	30%–45%	<30% — earnings quality too dependent on speculative merchandising income
Debt / EBITDA	≤3.5x	3.5x–5.0x	5.0x–6.0x	>6.0x — leverage unsustainable given commodity cycle volatility
Working Capital / Current Ratio (excl. grain line)	≥1.50x	1.20x–1.50x	1.05x–1.20x	<1.05x — insufficient liquidity buffer for harvest-season cash demands

Deal Structure Implication: If unit economics support DSCR only marginally above 1.20x in the lender's base case, require a debt service reserve fund equal to six months of principal and interest funded at closing — non-negotiable given the industry's throughput volatility.

---

Question 1.4: What is the borrower's competitive position within its primary trade area, and does it have defensible origination territory against cooperative and multinational competitors?

Rationale: The grain elevator industry has undergone decades of consolidation, with Cargill (approximately 16.8% market share), ADM (18.5%), Bunge (14.2% — expanding further through the completed Viterra merger in late 2024), and large cooperatives such as CHS and GROWMARK continuously acquiring or outcompeting independent operators. An independent country elevator's origination territory — typically a 15–30 mile radius — is its only durable competitive asset. If a well-capitalized competitor (cooperative or multinational) operates a superior facility within that radius, the borrower faces structural origination pressure that no amount of management effort can fully offset.^[31]

Assessment Areas:

• Map all competing grain-buying locations within a 25-mile radius: identify operator, facility type, rated capacity, and transportation access (rail, barge, truck-only)
• Borrower's basis bid relative to nearest competitors over the past three years: a consistently weaker basis indicates competitive pricing disadvantage
• Farmer loyalty indicators: percentage of primary trade area farmers who delivered to this elevator in each of the past five years
• Input supply integration: does the elevator sell fertilizer, seed, or chemicals, creating relationship stickiness beyond grain origination?
• Transportation access advantage: does the borrower have unit train loading capability (110-car shuttle loader) or barge access that competitors lack?

Verification Approach: Conduct a physical site visit and drive the trade area to identify competing facilities. Review USDA Agricultural Marketing Service grain price reports for local cash prices at competing facilities. Contact 3–5 farmers in the trade area (with borrower consent) and ask why they deliver to this elevator versus alternatives — the answers reveal competitive positioning more accurately than any management presentation.

Red Flags:

• A well-capitalized cooperative or multinational competitor operating a newer, higher-capacity facility within 15 miles with superior transportation access
• Borrower's cash basis consistently 5+ cents/bushel weaker than the nearest competitor — indicates structural pricing disadvantage
• Farmer customer base concentrated in a small number of large operations (>50% of volume from fewer than 10 farms) — creates single-event origination risk
• No input supply business or other service integration — pure grain buying with no relationship stickiness
• History of losing origination territory to competitors (declining market share within trade area over past five years)

Deal Structure Implication: For borrowers in highly competitive trade areas facing established cooperative or multinational competitors, require a minimum origination volume covenant (minimum bushels received annually) with a cure period — if the borrower cannot defend its origination territory, term debt repayment is structurally at risk.

---

Question 1.5: Is the proposed expansion or modernization project fully funded, operationally justified by demonstrated throughput demand, and structured so that base-business debt service is not dependent on expansion revenue?

Rationale: A documented failure pattern among grain elevator operators involves expansion projects initiated during commodity price peaks (2010–2014) that were sized to throughput projections that proved 20–30% optimistic. When commodity prices declined and on-farm storage competition intensified, the expanded facilities operated well below their design capacity, while debt service on the expansion financing remained fixed — creating a debt service trap. The Bunge-Viterra merger (completed late 2024) and continued CHS and GROWMARK cooperative investment are accelerating the competitive environment, making new capacity additions in contested trade areas particularly risky.^[31]

Key Questions:

• Total capital required for the expansion, broken down by real estate, construction, equipment, and contingency (minimum 10% contingency for agricultural construction projects)
• Sources and uses of all expansion capital — is there a meaningful equity injection (minimum 20% for new construction), or is the project entirely debt-financed?
• Is the existing facility currently operating at ≥80% capacity utilization, justifying additional capacity? Expansion without demonstrated demand is speculative.
• What is the timeline to positive cash flow contribution from the expansion, and what happens to base-business DSCR if expansion revenue is zero for 24 months?
• Has management successfully completed a capital project of comparable scale within the past 10 years?

Verification Approach: Run the base-case DSCR model using only existing operations with zero contribution from the expansion. If DSCR falls below 1.20x without expansion revenue, the deal is dependent on the expansion succeeding — which is a significantly higher risk profile. Require an independent feasibility study for any expansion exceeding $2M that includes a trade area throughput analysis and competitive landscape assessment.

Red Flags:

• Expansion capacity addition in a trade area where current throughput is already declining year-over-year
• Expansion revenue projections assuming throughput at 90%+ of new capacity in year one — historically unrealistic for country elevator additions
• No meaningful equity injection — 100% debt-financed expansion eliminates the borrower's financial cushion
• Management team has no prior experience completing a capital project of comparable scale
• Expansion capex plan does not include adequate contingency — agricultural construction projects regularly run 10–20% over initial estimates

Deal Structure Implication: Structure expansion projects with a capex holdback and milestone-based draws tied to demonstrated construction progress; require a separate debt service reserve for the expansion component funded at closing equal to 12 months of incremental debt service attributable to the expansion.

II. Financial Performance & Sustainability

Historical Financial Analysis

Question 2.1: What is the quality and completeness of financial reporting, and what do 36 months of monthly financials reveal about underlying earnings quality, seasonality, and trend?

Rationale: Grain elevator financial reporting presents specific complexity: revenue recognition for grain merchandising (mark-to-market vs. realized), inventory valuation methodology (FIFO vs. LIFO vs. lower of cost or market), and the treatment of deferred payment obligations to farmers can all materially affect reported earnings quality. Unsophisticated operators frequently present aggregate annual P&Ls that mask deteriorating unit economics — monthly statements are essential to reveal the harvest-season concentration pattern and identify whether cash flow is genuinely sufficient for year-round debt service.^{References:[29][30][31]}

Glossary

Financial & Credit Terms

DSCR (Debt Service Coverage Ratio)

Definition: Annual net operating income (EBITDA minus maintenance capex and taxes) divided by total annual debt service (principal plus interest). A ratio of 1.0x means cash flow exactly covers debt payments; below 1.0x means the borrower cannot service debt from operations alone.

In grain elevator lending: Industry median DSCR is approximately 1.25x; top quartile operators maintain 1.55x or above; bottom quartile operates at 1.05–1.10x, leaving virtually no cushion. DSCR calculations for grain elevators must account for pronounced seasonality — harvest-period cash inflows (October through December for corn and soybeans) can mask chronic low-season deficits. Lenders should calculate both annual DSCR and a trough-quarter DSCR to capture seasonal cash flow variability. USDA B&I program guidelines typically require a minimum 1.25x at origination. Maintenance capex of 3–5% of asset replacement value should be deducted before computing DSCR, as deferred maintenance is a leading indicator of collateral impairment in this asset class.

Red Flag: DSCR declining below 1.15x for two consecutive annual periods, or trough-quarter DSCR below 0.85x, signals deteriorating debt service capacity and typically precedes formal covenant breach by one to two crop cycles. Simultaneous grain line utilization at or near maximum capacity amplifies this signal.

Leverage Ratio (Debt / EBITDA)

Definition: Total debt outstanding divided by trailing twelve-month EBITDA. Measures how many years of earnings are required to repay all debt at current earnings levels.

In grain elevator lending: Industry median leverage is approximately 4.2x, reflecting the capital intensity of concrete silos, steel bins, dryers, and handling equipment alongside substantial working capital debt. Top-quartile operators maintain leverage below 2.5x (consistent with The Andersons' publicly stated 2.5x target). Leverage above 5.5x leaves insufficient cash flow for capex reinvestment and creates acute refinancing risk during commodity price downturns. Critically, EBITDA for grain elevators is highly volatile — a single adverse crop year or basis trading loss can reduce EBITDA by 30–50%, causing leverage ratios to spike dramatically from their origination-year levels.

Red Flag: Leverage increasing above 5.5x combined with declining EBITDA is the double-squeeze pattern that has preceded the majority of independent grain elevator defaults since 2019. Evaluate leverage on a stress-adjusted basis using a 70% throughput volume scenario, not solely on trailing performance.

Fixed Charge Coverage Ratio (FCCR)

Definition: EBITDA divided by the sum of principal, interest, lease payments, and other fixed obligations. More comprehensive than DSCR because it captures all fixed cash obligations, not just debt service.

In grain elevator lending: Fixed charges for grain elevators include term loan debt service, equipment lease payments (dryers, conveyors, scale systems), real property lease obligations for rented elevator sites, and required minimum maintenance capex covenants. Typical FCCR covenant floor is 1.15x–1.20x. For elevators with significant leased infrastructure — a common structure for cooperatives that lease rail sidings or barge loading facilities — FCCR may diverge meaningfully from DSCR and is the more conservative and appropriate measure.

Red Flag: FCCR below 1.10x triggers immediate lender review under most USDA B&I covenant structures. Lease obligations that are off-balance-sheet must be capitalized and included in the fixed charge calculation — failure to do so systematically overstates coverage.

Loss Given Default (LGD)

Definition: The percentage of loan balance lost when a borrower defaults, after accounting for collateral recovery and workout costs. LGD equals one minus the recovery rate.

In grain elevator lending: Secured lenders in grain elevator credits have historically recovered 50–65% of loan balance in orderly liquidation scenarios, implying LGD of 35–50%. Recovery is primarily driven by real property value (concrete silos and land, typically 60–75% of appraised value in a distressed sale), equipment salvage (40–60% of book value for dryers and conveyors), and grain inventory liquidation (market price less 20–30% haircut). Rural location, agricultural-only functionality, and limited buyer pools for specialized assets compress orderly liquidation values relative to urban industrial properties. Workout timelines of two to four years are typical, adding carrying costs that further reduce net recovery.

Red Flag: Concrete slip-form silos have essentially no alternative-use value outside of agricultural storage — in a distressed sale in a rural market with few buyers, realized liquidation values may fall to 40–50% of appraised value. Ensure loan-to-value at origination reflects liquidation-basis collateral values, not replacement cost or income-capitalized appraised values.

Operating Leverage

Definition: The degree to which revenue changes are amplified into larger EBITDA changes due to fixed cost structure. High operating leverage means a 1% revenue decline causes a disproportionately larger EBITDA decline.

In grain elevator lending: Grain elevators carry a significant fixed cost base — depreciation on silos and infrastructure, property taxes, insurance, base labor for year-round staff, and debt service on facility loans — that does not flex with throughput volume. Variable costs (drying fuel, seasonal labor, grain purchases) scale with volume. A 15–20% throughput volume decline (analogous to a moderate drought year) can reduce EBITDA by 30–40%, implying an operating leverage multiplier of approximately 2.0x–2.5x. This is substantially higher than the 1.0x–1.5x multiplier for general warehousing operators.

Red Flag: Always stress DSCR at the operating leverage multiplier — a 20% revenue decline scenario should be modeled as a 40–50% EBITDA decline, not a 20% decline. Lenders who apply 1:1 revenue-to-EBITDA stress assumptions systematically underestimate downside risk in grain elevator credits.

Industry-Specific Terms

Basis

Definition: The difference between the local cash price paid to farmers for grain at a specific elevator and the nearby futures contract price on the Chicago Board of Trade (CBOT). Basis is typically expressed as a negative number (e.g., "corn is 35 cents under March") and represents local supply/demand conditions, transportation costs, and quality differentials relative to the futures benchmark.

In grain elevator lending: Basis is the primary revenue driver for elevator merchandising operations. A strengthening (narrowing) basis generates income for elevators that have purchased grain at a weak basis and can sell at a stronger basis. A widening negative basis — indicating oversupply or poor export demand — compresses merchandising margins and can produce basis trading losses. The 2018–2019 trade war with China widened soybean basis at Midwest elevators by 40–80 cents per bushel, directly impairing elevator merchandising income. Current record corn surplus conditions (2025–2026) are suppressing corn basis in many interior markets.

Red Flag: Persistently widening negative basis in the borrower's primary commodity (corn, soybeans, or wheat) is a leading indicator of deteriorating merchandising margins. Require monthly basis reports for elevators with active merchandising programs. Basis widening combined with high grain line utilization is an acute liquidity warning.

Throughput Volume (Bushels Handled)

Definition: The total volume of grain (measured in bushels) received, dried, stored, and shipped by an elevator during a defined period — typically a crop year (September through August). Throughput is the fundamental operating metric for grain elevators, as handling fees, drying income, and storage revenue are all volume-dependent.

In grain elevator lending: Throughput volume is the single most important operational metric for credit underwriting. A minimum of five years of historical throughput data should be required, capturing at least one adverse weather year. Throughput below 60–70% of design capacity for two consecutive years signals structural origination territory weakness. For country elevators, typical throughput ranges from 3 million to 15 million bushels annually; terminal elevators may handle 50 million to 200 million bushels. Throughput declines of 20–30% (analogous to a moderate drought) must be stress-tested against DSCR covenants.

Red Flag: Multi-year throughput decline in the absence of a weather event signals competitive loss of origination territory to on-farm storage or rival elevators — a structural, not cyclical, impairment that cannot be recovered through operating improvements alone.

USDA Warehouse Act License

Definition: A federal operating license issued under the United States Warehouse Act (7 U.S.C. § 241 et seq.) that authorizes a grain storage facility to issue electronic warehouse receipts (EWRs) for grain stored on behalf of depositors. Licensed warehouses are subject to USDA inspection, minimum net worth requirements, and bonding or trust fund obligations.

In grain elevator lending: Maintenance of USDA Warehouse Act licensure is an operational prerequisite for most commercial grain elevator business models — without it, the elevator cannot issue warehouse receipts, which are required by most farmer depositors and grain merchandising counterparties. License suspension or revocation immediately halts operations and triggers loan default. USDA Agricultural Marketing Service (AMS) publishes a public list of licensed warehouses; lenders should verify license status at origination and monitor it annually as a covenant compliance item.

Red Flag: Any USDA inspection deficiency notice, warning letter, or license suspension proceeding is a critical early warning indicator of impending operational and financial distress. USDA FGIS license revocation has preceded elevator bankruptcy in multiple documented cases. Require immediate lender notification of any USDA regulatory action as an affirmative covenant.

Grain Line of Credit (Operating Line)

Definition: A seasonal revolving credit facility — typically provided by the Farm Credit System (AgriBank, CoBank), a commercial bank, or a cooperative lending institution — used to finance grain inventory purchases at harvest. The grain line is drawn down as the elevator buys grain from farmers and repaid as grain is sold to processors, exporters, or other buyers.

In grain elevator lending: The grain line is structurally senior to USDA B&I and SBA term debt in the operating cash flow waterfall. For mid-size country elevators, grain lines typically range from $5 million to $50 million; for terminal elevators, $50 million to $500 million. Grain line renewal is annual and subject to the lender's risk appetite and the borrower's financial condition. Failure to renew the grain line at harvest is operationally catastrophic — the elevator cannot purchase grain, destroying throughput revenue for the entire crop year. Grain line utilization consistently at or near maximum capacity is a leading liquidity stress indicator.

Red Flag: Any indication that the grain line lender is reducing the commitment amount, requiring additional collateral, or conditioning renewal on financial improvements should trigger immediate review of the term loan credit. Obtain written confirmation of grain line renewal status annually as a loan covenant requirement.

Contango (Carry)

Definition: A futures market condition in which the price of a commodity for future delivery is higher than the current spot (cash) price. Contango provides the economic incentive for commercial grain storage — the forward premium must exceed the cost of storage (interest, insurance, shrinkage) for storage to be profitable.

In grain elevator lending: When futures markets are in contango, elevator operators earn a positive "carry" return by purchasing grain at harvest (low spot price) and selling forward at higher deferred prices. When markets are in backwardation (inverted — spot price higher than deferred), storage is economically unattractive and elevator storage income collapses. The adequacy of contango to cover carry costs — particularly in the current elevated interest rate environment (Bank Prime Rate above 7.5% as of 2025) — is a critical determinant of storage income profitability.

Red Flag: Persistent backwardation or flat futures curves in the borrower's primary commodity eliminate the economic rationale for commercial storage and directly impair storage revenue. In the current elevated interest rate environment, the contango must exceed 5–7 cents per bushel per month to cover carry costs — verify this arithmetic before underwriting storage-income-dependent cash flows.

Commingling

Definition: The practice of mixing grain from multiple farmer-depositors into common storage without maintaining identity-preserved lot segregation. Commingling is standard practice in commercial grain storage and is permitted under USDA Warehouse Act regulations, provided the elevator maintains accurate accounting of each depositor's quantity and grade entitlement.

In grain elevator lending: Unauthorized commingling — or issuing storage receipts for quantities that exceed physical grain in storage — is the primary mechanism of grain elevator fraud. Multiple elevator failures (including several documented cases in Tennessee, Kentucky, and the Mid-South since 2019) have involved storage receipt fraud, resulting in total loss for secured lenders and criminal prosecution of operators. Lenders cannot rely solely on financial statements to detect commingling fraud; independent physical grain inventory audits are essential.

Red Flag: Refusal to permit independent third-party grain inventory audits, discrepancies between scale tickets and storage receipt totals, or farmer complaints about delayed payments or grade disputes are acute fraud warning signs. Require annual independent physical inventory audit as a loan covenant and conduct unannounced verification visits during peak storage periods.

Shuttle Train / Unit Train Loading

Definition: A grain transportation configuration in which a single elevator loads a dedicated train of 75 to 110 rail cars (a "unit train") with grain destined for a single export terminal or processing facility, without intermediate switching or assembly at rail yards. Shuttle train capability requires specialized loop track infrastructure and high-speed loading systems capable of loading 100+ cars in 12–24 hours.

In grain elevator lending: Shuttle train capability is a major competitive differentiator for grain elevators, enabling access to Class I railroad incentive rates that are 15–25% below standard car-rate pricing. Elevators with shuttle train infrastructure command stronger basis (better prices to farmers), attract higher origination volumes, and generate superior throughput margins. Capital investment in shuttle loader infrastructure typically ranges from $5 million to $20 million. Elevators lacking competitive transportation access face structural basis disadvantages relative to shuttle-capable competitors in their origination territory.

Red Flag: An elevator in a rail-served market that lacks shuttle train capability and is competing against a shuttle-capable rival within 30 miles faces a structural basis disadvantage that cannot be overcome through operational improvements alone. This is a long-term origination territory erosion risk that should be reflected in conservative throughput projections.

USDA Grain Dealer / Warehouseman Bond

Definition: A surety bond required by USDA and most grain-producing states as a financial guarantee that a licensed grain dealer or warehouseman will fulfill its obligations to farmer-depositors, including payment for grain purchased and return of stored grain. Bond amounts are typically calculated as a percentage of the operator's peak grain handling volume or annual purchases.

In grain elevator lending: USDA bonds are federal surety bonds required to ensure businesses in regulated agricultural industries comply with federal law. State grain dealer bonds add a parallel obligation in most Corn Belt and Plains states. Bond coverage must be maintained continuously — a lapse in bonding can trigger license suspension. Bond adequacy should be verified relative to the elevator's actual grain handling volume, as operators who have grown their business without proportionally increasing bond coverage may be technically under-bonded.

Red Flag: Inability to obtain or renew surety bond coverage — which occurs when the surety underwriter assesses the operator as financially impaired — is a critical distress signal. Surety companies have access to financial information and industry relationships that may surface problems before they appear in lender financial reporting. Require annual bond renewal confirmation and copy of current bond certificate as a covenant deliverable.

On-Farm Storage

Definition: Grain storage bins, silos, and associated handling equipment owned and operated by individual farm operations on their own property, allowing farmers to store their own production without delivering to a commercial elevator. On-farm storage enables farmers to control their own marketing timing and capture the storage margin that would otherwise accrue to commercial operators.

In grain elevator lending: The secular expansion of on-farm storage has been one of the most significant structural headwinds for commercial elevator throughput volumes over the past two decades. As of December 1, 2025, approximately 80% of on-farm storage capacity was utilized — a level that is forcing farmers to deliver excess production to commercial elevators, creating a near-term throughput positive. However, if commodity prices recover and farm income improves, investment in on-farm storage could resume, reversing this trend. The U.S. Grain Storage Silos Market is projected to grow at a 4.2% CAGR through 2031, suggesting continued but moderate on-farm investment pressure.

Red Flag: An elevator in a region with high and growing on-farm storage penetration — evidenced by declining throughput volumes despite stable or growing crop production — faces a structural origination territory threat. Assess on-farm bin density within the primary trade area as part of market study underwriting.

Lending & Covenant Terms

Maintenance Capex Covenant

Definition: A loan covenant requiring the borrower to spend a minimum amount annually on capital maintenance to preserve asset condition and operating capability. Prevents cash stripping at the expense of long-term asset value and collateral integrity.

In grain elevator lending: Recommended minimum maintenance capex covenant: 3–5% of net fixed asset replacement value annually, or a specified dollar floor (e.g., $150,000 for a small country elevator, $500,000+ for a terminal facility). Industry-standard maintenance capex is approximately 3–4% of revenue; operators spending below 2% for two or more consecutive years show elevated asset deterioration risk. Grain elevator infrastructure — legs, conveyors, dryers, aeration systems — is subject to significant wear during high-volume harvest periods and requires consistent reinvestment. The average age of U.S. commercial grain elevator infrastructure is increasing as consolidation has reduced reinvestment among smaller operators. Require quarterly capex spend reporting rather than annual, given the concentration of harvest-period stress on equipment.

Red Flag: Maintenance capex persistently below depreciation expense is a clear signal of asset base consumption — equivalent to slow-motion collateral impairment. For concrete slip-form silos, deferred maintenance on aeration, moisture monitoring, and structural integrity systems can result in grain spoilage losses that simultaneously impair inventory collateral and generate farmer depositor claims.

Hedging Policy Covenant

Definition: A loan covenant requiring the borrower to maintain and adhere to a Board-approved written hedging policy governing the use of futures, options, and forward contracts to manage commodity price risk on grain inventory positions. The policy must specify maximum unhedged position limits, approved hedging instruments, and reporting requirements.

In grain elevator lending: A Board-approved hedging policy is the single most important operational covenant for grain elevator credits with active merchandising operations. Without a documented and enforced hedging policy, an elevator operator can accumulate catastrophic unhedged grain positions that wipe out equity in a single commodity price move — CBOT corn, soybean, and wheat prices can move 20–40% within a single marketing year. The policy should specify: maximum unhedged inventory as a percentage of working capital line (recommended: no more than 20–25%); approved hedging instruments (futures, exchange-traded options, forward contracts with approved counterparties); margin call liquidity reserve requirements; and monthly reporting obligations to the lender during active hedging periods (October through March).

Red Flag: Failure to provide monthly position reports, discovery of positions exceeding policy limits, or margin call demands from the futures commission merchant (FCM) that exceed the borrower's liquidity reserve are acute default risk signals. Verify that the elevator's FCM account is with a reputable, regulated firm and that the lender has visibility into account balances and position summaries.

Intercreditor / Subordination Agreement

Definition: A legal agreement between two or more lenders to a common borrower that defines the priority of their respective claims on collateral and cash flows in the event of default or bankruptcy. For grain elevator credits, the intercreditor agreement typically governs the relationship between the grain line lender (senior, revolving) and the term lender (USDA B&I or SBA, typically subordinate on operating cash flows).

In grain elevator lending: Because the grain line of credit is structurally senior to term debt in the operating cash flow waterfall, USDA B&I and SBA term lenders must obtain an intercreditor or subordination agreement with the grain line lender at origination. This agreement should specify: the maximum grain line commitment amount (beyond which additional draws require term lender consent); the term lender's right to cure grain line defaults; the priority of collateral claims (grain inventory to grain line lender; real property and equipment to term lender); and cross-default provisions. Without a properly structured intercreditor agreement, the term lender may find its collateral access blocked by the grain line lender in a default scenario.

Red Flag: Borrowers who resist providing an intercreditor agreement, or grain line lenders who refuse to execute one, signal either structural subordination concerns or undisclosed financial stress. The absence of a documented intercreditor agreement in a grain elevator credit with both a grain line and term debt is a significant underwriting deficiency.

Appendix

Extended Historical Performance Data (10-Year Series)

The following table extends the historical data beyond the main report's five-year window to capture a full business cycle, including the 2020 pandemic disruption and the 2015–2016 farm income contraction — two significant stress periods for grain elevator operators. Recession and stress years are marked for lender context.

Farm Product Warehousing and Storage (NAICS 493130) — Industry Financial Metrics, 2016–2026 (10-Year Series)^[30]

Year	Revenue (Est. $B)	YoY Growth	EBITDA Margin (Est.)	Est. Avg DSCR	Est. Default Rate	Economic Context
2016	$4.10	–3.5%	7.2%	1.18x	1.8%	↓ Farm Income Stress — commodity prices near multi-year lows; corn at $3.36/bu; multiple independent elevator failures
2017	$4.25	+3.7%	7.8%	1.22x	1.4%	Partial Recovery — stabilizing corn and soybean prices; export demand improving
2018	$4.55	+7.1%	8.1%	1.27x	1.2%	↓ Trade War Onset — U.S.-China tariff escalation; soybean exports to China collapsed; basis disruption
2019	$4.85	+6.6%	8.4%	1.28x	1.1%	Stabilization — Phase One trade deal expectations; MFP bailout payments partially offset farmer losses
2020	$5.12	+5.6%	8.6%	1.30x	0.9%	↓ COVID-19 — demand disruption offset by strong on-farm storage demand; commodity prices initially fell then recovered
2021	$6.34	+23.8%	9.2%	1.38x	0.7%	↑ Commodity Boom — corn and soybean prices surged; elevated revenue partially pass-through; strong throughput
2022	$7.48	+18.0%	9.8%	1.42x	0.6%	↑ Peak Cycle — Ukraine war disruption; CBOT corn near $8.00/bu; record storage fee revenue
2023	$6.92	–7.5%	8.3%	1.24x	1.1%	↓ Price Correction — commodity prices retreated from peaks; drought in portions of Corn Belt; margin compression
2024	$7.15	+3.3%	8.5%	1.26x	1.0%	Partial Recovery — record corn harvest beginning; on-farm storage nearing capacity; trade policy uncertainty
2025E	$7.39	+3.4%	8.6%	1.27x	1.0%	↑ High Volume / Low Price — record off-farm corn stocks; 80% on-farm utilization; elevated carry costs
2026F	$7.62	+3.1%	8.4%	1.25x	1.2%	Cautious — tariff escalation risk; high interest carry costs; Bunge-Viterra integration competitive pressure

Sources: U.S. Census Bureau Economic Census; USDA Economic Research Service; IBISWorld Industry Report (NAICS 493130); FRED macroeconomic series. EBITDA margins and DSCR estimates are derived from RMA Annual Statement Studies benchmarks and publicly reported operator financials. Default rates estimated from FDIC Charge-Off Rate on Business Loans (FRED: CORBLACBS) calibrated to agricultural lending subsector patterns.^[30]

Regression Insight: Over this 10-year period, each 1% decline in real GDP growth correlates with approximately 80–120 basis points of EBITDA margin compression and approximately 0.08x–0.12x DSCR compression for the median grain elevator operator. For every two consecutive quarters of revenue decline exceeding 7%, the annualized default rate increases by approximately 0.5–0.8 percentage points based on the 2015–2016 and 2022–2023 observed patterns. Commodity price declines of 20% or more — such as the 2022–2023 correction — produce disproportionate margin compression relative to revenue decline, as storage fee revenue adjusts more slowly than the commodity-price-linked pass-through component of reported revenues.^[31]

Industry Distress Events Archive (2019–2026)

The following table documents notable distress patterns in the grain elevator sector. Individual small-operator bankruptcies in this industry are often not publicly reported due to the prevalence of private and cooperative ownership structures; the entries below represent documented patterns and composite examples drawn from USDA FGIS license revocation records, FDIC agricultural lending data, and industry sources.

Notable Bankruptcies and Material Distress Events — Farm Product Warehousing and Storage (2019–2026)^[32]

Operator Class / Event	Period	Event Type	Root Cause(s)	Est. DSCR at Filing	Creditor Recovery (Est.)	Key Lesson for Lenders
Multiple Small Independent Elevators — Mid-South & Great Plains (Composite)	2019–2024	Chapter 7 Liquidation / Chapter 11 (multiple operators)	Over-leveraged balance sheets from 2010–2014 construction debt; loss of farmer patronage to cooperative competitors; basis trading losses; inability to meet grain storage obligations to farmer-depositors; USDA FGIS license revocations triggered by shortfalls in bonding and inventory	Below 1.00x (estimated 0.75–0.90x at filing)	40–60% on secured real estate; 10–25% on equipment; near-zero on unsecured grain obligations	USDA Warehouse Act license revocation is a leading indicator of impending default — monitor USDA FGIS license status quarterly. Customer concentration in a single crop or geography amplifies drought and price risk. Grain line non-renewal is the most common immediate trigger of liquidity failure.
Farm Income Contraction Wave — Corn Belt Independent Operators	2015–2016	Voluntary Liquidation / Facility Closure	Sustained low commodity prices (corn at $3.36/bu in 2016); compressed storage margins; inability to refinance construction debt at maturity; competition from on-farm storage expansion subsidized by USDA FSA programs	0.90–1.05x (estimated)	50–65% on real property (silos, bins); 30–40% on equipment	DSCR covenant at 1.20x with annual testing would have identified stress 12–18 months before facility closure. Throughput volume decline of 15%+ over two consecutive years is a high-confidence early warning signal requiring immediate covenant review.
ADM Nutrition Segment — Accounting Irregularities & SEC Investigation	2024–2025	Financial Restatement / CEO Departure / SEC Investigation (not bankruptcy)	Accounting irregularities in Nutrition segment; SEC investigation; financial restatements; CEO departure; cost-reduction program of $500M+. Core grain storage and origination operations remained intact and unimpaired.	N/A — corporate entity remained solvent; grain operations unaffected	N/A — no creditor loss on grain storage obligations	For elevators relying on ADM contracts for price discovery and forward marketing, counterparty financial stress at the multinational level can create origination uncertainty even when grain operations are functionally intact. Monitor counterparty financial health of major grain buyers.

Macroeconomic Sensitivity Regression

The following table quantifies how Farm Product Warehousing and Storage (NAICS 493130) revenue and margins respond to key macroeconomic drivers, providing lenders with a framework for forward-looking stress testing of grain elevator credits.

Industry Revenue and Margin Elasticity to Macroeconomic Indicators — NAICS 493130^[33]

Macro Indicator	Elasticity Coefficient	Lead / Lag	Strength of Correlation (Est. R²)	Current Signal (2026)	Stress Scenario Impact
Real GDP Growth	+0.6x (1% GDP growth → +0.6% industry revenue)	Same quarter; indirect via farm income and construction demand	0.42 (moderate — commodity prices dominate over GDP)	GDP at ~2.2% — neutral for industry; commodity price dynamics more determinative	–2% GDP recession → –1.2% industry revenue; –80 to –100 bps EBITDA margin
CBOT Corn & Soybean Prices (Primary Revenue Driver)	+1.4x (10% commodity price increase → +14% reported industry revenue, partially pass-through)	Same quarter (immediate pass-through in reported revenue)	0.78 (high — commodity prices are the dominant revenue driver)	Corn ~$4.40/bu; soybeans ~$9.80/bu — both below 2022 peaks; suppressed basis environment	–30% commodity price decline → –20 to –25% industry revenue; –150 to –200 bps EBITDA margin over 2 quarters
U.S. Agricultural Export Volume (USDA)	+0.9x (10% export volume decline → –9% elevator throughput revenue)	1–2 quarter lag (origination volumes adjust after export demand signals)	0.65 (strong for export-oriented facilities; lower for domestic-use oriented operators)	Export uncertainty elevated due to tariff escalation risk; China soybean purchases diverted to Brazil and Argentina	–25% export volume shock (2018–2019 trade war analog) → –15 to –20% throughput revenue at export-oriented elevators; –120 to –180 bps EBITDA margin
Federal Funds Rate / Bank Prime Loan Rate (Inventory Carry Cost)	–0.8x demand impact; direct debt service cost increase of ~$50K–$150K per $1M of grain line per 100 bps rate increase	Same quarter (immediate impact on revolving grain line cost)	0.55 (moderate — rate impact is direct on operating costs, indirect on farmer storage behavior)	Bank Prime at ~7.5% (FRED: DPRIME); elevated relative to 2010–2021 era; gradual easing expected but "higher for longer" posture persists	+200 bps shock → +$100K–$300K annual operating cost increase per $5M grain line; DSCR compresses –0.08x to –0.15x for median operator
Crop Production Index (USDA NASS — Corn & Soybean Yields)	+1.1x (10% yield decline → –11% throughput volume at country elevators)	Same crop year (harvest-season volume is directly determined by yield)	0.72 (high for country elevators; lower for terminal facilities with multi-region origination)	Record 2025 corn yields; above-average soybean yields — throughput volumes elevated; on-farm storage at 80% utilization	–30% yield shock (2012 drought analog) → –25 to –30% throughput revenue; –200 to –300 bps EBITDA margin; DSCR potentially below 1.0x for thin-margin operators
Wage Inflation (Above CPI — Rural Labor Markets)	–0.4x margin impact (1% above-CPI wage growth → –15 to –20 bps EBITDA margin)	Same quarter; cumulative over time	0.38 (moderate — labor is 15–20% of operating costs for typical elevator)	Industry wages growing +3.5–4.5% vs. ~2.7% CPI — approximately –15 to –25 bps annual margin headwind	+3% persistent above-CPI wage inflation → –45 to –60 bps cumulative EBITDA margin over 3 years; particularly acute for smaller operators with limited automation

Sources: FRED macroeconomic series (FEDFUNDS, DPRIME, GDPC1); USDA Economic Research Service; USDA NASS Crop Production reports; CME Group grain market data.^[33]

Historical Stress Scenario Frequency and Severity

Based on historical industry performance data spanning the 2005–2026 period, the following table documents the actual occurrence, duration, and severity of industry downturns. This serves as the probability foundation for stress scenario structuring in grain elevator credit underwriting.

Historical Industry Downturn Frequency and Severity — NAICS 493130 (2005–2026)^[31]

Scenario Type	Historical Frequency	Avg Duration	Avg Peak-to-Trough Revenue Decline	Avg EBITDA Margin Impact	Avg Default Rate at Trough	Recovery Timeline
Mild Correction (revenue –5% to –10%; e.g., 2023 price correction)	Once every 3–4 years	2–3 quarters	–7% from peak	–100 to –150 bps	~1.0–1.2% annualized	3–4 quarters to full revenue recovery; margin recovery may lag 1–2 quarters
Moderate Stress (revenue –15% to –25%; e.g., 2015–2016 farm income contraction)	Once every 7–10 years	4–6 quarters	–18% from peak	–200 to –350 bps	~1.5–2.0% annualized	6–10 quarters; operator consolidation and facility closures common; margin recovery lags revenue recovery by 2–4 quarters
Severe Stress (revenue >–25%; e.g., 2012 drought + trade disruption combined shock)	Once every 12–15 years	6–10 quarters	–30 to –35% from peak (throughput volume basis)	–400 to –600 bps; operators below breakeven possible	~2.5–4.0% annualized at trough	10–18 quarters; structural industry changes including accelerated consolidation; some operators do not recover

Implication for Covenant Design: A DSCR covenant at 1.20x withstands mild corrections (historical frequency: approximately 1 in 4 years) for approximately 75% of operators but is breached in moderate stress scenarios for an estimated 40–50% of bottom-quartile operators. A 1.25x covenant minimum — the recommended threshold established in this report — withstands moderate stress for approximately 65–70% of top-quartile operators. For loan tenors exceeding 10 years, lenders should structure DSCR covenants with step-up provisions (e.g., 1.20x in years 1–3, 1.25x in years 4–7, 1.30x in years 8+) to reflect the increasing probability of a moderate stress event over longer horizons. Annual DSCR testing alone is insufficient for grain elevator credits — semi-annual testing aligned with harvest-season cash flow peaks is strongly recommended.^[31]

NAICS Classification and Scope Clarification

Primary NAICS Code: 493130 — Farm Product Warehousing and Storage

Includes: Grain elevators engaged primarily in storage for hire; bulk grain storage terminals (country, inland, river, and export); farm product warehouses (non-refrigerated) storing corn, soybeans, wheat, sorghum, and other field crops; commodity storage for USDA Commodity Credit Corporation (CCC) programs; soybean, corn, wheat, and sorghum storage facilities charging handling, drying, and storage fees; grain conditioning and aeration services as ancillary to storage.

Excludes: Refrigerated warehousing and storage (NAICS 493110 — cold storage for perishable agricultural products); grain elevators primarily engaged in merchant wholesaling of grain as the primary business activity (NAICS 424510 — Grain and Field Bean Merchant Wholesalers); on-farm storage bins owned and operated by farmers for their own production; feed manufacturing facilities (NAICS 311119); ethanol plants with incidental grain storage; pipeline transportation of agricultural commodities (NAICS 486910).

Boundary Note: The most significant classification boundary issue for lenders is the overlap between NAICS 493130 and NAICS 424510. Many grain elevator operators engage in both storage-for-hire (493130) and grain merchandising/trading (424510) activities. When merchandising revenue exceeds storage and handling fee revenue, the establishment may be classified under 424510, which carries different SBA size standards (receipts-based threshold of $47M for 493130 vs. $47M for 424510 — similar, but financial benchmarks differ materially). Lenders should verify NAICS classification against actual revenue composition and not rely solely on the borrower's self-reported code.

Related NAICS Codes (for Multi-Segment Borrowers)

NAICS Code	Title	Overlap / Relationship to Primary Code
NAICS 424510	Grain and Field Bean Merchant Wholesalers	Primary classification overlap — operators whose merchandising revenue exceeds storage revenue may be classified here; different financial benchmarks apply; same SBA size standard threshold
NAICS 493110	Refrigerated Warehousing and Storage	Adjacent classification for cold-storage agricultural commodities (e.g., frozen corn, soy products); some integrated facilities may have both classifications
NAICS 493190	Other Warehousing and Storage	Residual warehousing classification; some diversified storage operators may have mixed classifications
NAICS 115114	Postharvest Crop Activities (except Cotton Ginning)	Covers grain cleaning, conditioning, and drying when performed as a standalone service; some elevator services may overlap with this code
NAICS 311119	Other Animal Food Manufacturing	Relevant for elevator operators that also produce or process feed grain products; vertically integrated operators may have revenues in both codes
NAICS 325193	Ethyl Alcohol Manufacturing (Fuel Ethanol)	Relevant for operators co-located with or owning ethanol plants; The Andersons, Inc. is the primary publicly traded example of this integrated model

Methodology and Data Sources

Data Source Attribution

• Government Sources: U.S. Census Bureau Economic Census (primary revenue and establishment data — census.gov/econ); U.S. Census Bureau County Business Patterns (employment and establishment trends — census.gov/programs-surveys/cbp.html); USDA Economic Research Service (agricultural production, export, and market data — ers.usda.gov); Bureau of Labor Statistics Industry at a Glance NAICS 49 (employment and wage data — bls.gov/iag/tgs/iag49.htm); Bureau of Labor Statistics Occupational Employment and Wage Statistics (bls.gov/oes); FRED macroeconomic series including FEDFUNDS, DPRIME, GS10, GDPC1, UNRATE, CORBLACBS, PAYEMS (fred.stlouisfed.org); FDIC Quarterly Banking Profile and agricultural lending charge-off data (fdic.gov/analysis/quarterly-banking-profile); SBA Size Standards Table (sba.gov/document/support-table-size-standards); USDA Rural Development B&I Loan Program guidelines (rd.usda.gov/programs-services/business-programs/business-industry-loan-guarantees); FDIC Climate Risk Management Principles (RIN 3064-ZA32, 2022); USDA ERS Wheat Exports Rail Transportation research (September 2023).
• Web Search Sources: farmdoc daily (University of Illinois, February 2026) — on-farm storage capacity stagnation and utilization data; Brownfield Ag News (February 2026) — commercial storage surplus capacity data; CoBank Knowledge Exchange (January 2026) — farmer grain marketing behavior data; The Andersons, Inc. Q4 2025 earnings release and February 2026 investor presentation (Nasdaq, StockTitan, MarketScreener); Bunge Global Q4 2025 earnings call transcript (AOL/Seeking Alpha); Farm Progress (February 2026) — corn surplus and market outlook; AgWeb (January 2026) — unpriced corn volume analysis; CME Group (February 2026) — USDA report market impact analysis; Mordor Intelligence (February 2026) — U.S. Grain Storage Silos Market report; Inspire Surety (January 2026) — USDA bond requirements documentation; blog.gettransport.com (February 2026) — trade war farmer impact analysis.
• Industry Publications: IBISWorld Industry Report — Farm Product Warehousing and Storage in the US (2025); Grain and Milling Annual 2025 (referenced via The Andersons investor presentation for storage capacity rankings); RMA Annual Statement Studies (financial ratio benchmarks for NAICS 493130).
• Financial Benchmarking: RMA Annual Statement Studies (primary source for current ratio, debt-to-equity, and asset turnover benchmarks); publicly reported financials from The Andersons, Inc. (ANDE) as the primary publicly traded mid-tier benchmark; Bunge Global SA (BG) for large-cap operator benchmarks; FDIC CORBLACBS charge-off series for default rate calibration.