The Truth About Steel and Bin Prices

Construction demand and COVID-19 supply chain issues caused steel prices to soar in 2021 until they hit an all-time high in May. But then, steel prices fell through most of 2022—a 31 per cent decrease from June 2021 to June 2022, partly due to the war in Ukraine and the energy crisis in Europe. Of course, the price you pay for steel varies based on the type of steel you need and where you are, but this trend was global.

Steel is the largest component of grain bins, yet bin prices went up through most of 2022. In Alberta government’s farm input price index, the price of a 4,000-bushel bin with a hopper bottom increased from $19,261 to $23,508 from January 2022 to January 2023—that’s 22 per cent. What’s going on?

Sid Lockhart is Meridian Manufacturing’s marketing manager. Lockhart says the problem for Meridian began before 2022, when steel prices rose from 50 to 60 per cent. “There’s no way that we could pass that on to the customers,” Lockhart says. “You’d basically just shut the doors.”

Meridian knows farmers have other storage options. If bins become too expensive, there are always grain bags. And in a pinch, grain can even be stored on the ground.

So instead of passing on the full steel price increase in 2021, Meridian only passed along roughly half of the increase, lowering their profit margins. Then, he says, “Last year, when steel prices started coming down, we didn’t drop our prices until about November.”

Bin prices were lower last November, but don’t plan on that forever. In early March 2023, prices started rising again.

When it comes to steel prices, Meridian and other manufacturers find themselves in a tough position. Steel is not publicly traded, so there’s no simple way to hedge their input prices. Instead, Lockhart says, “We do bookings with our dealers.” In October or November, Meridian speaks for the steel they’ll need for the upcoming year.

If farmers have the cash, Lockhart says, “They’ll hedge their farm inputs by owning them.” Once you’ve paid for a year’s worth of fertilizer, you risk watching the price fall, but at least you know how much you’ve paid and you can work around it. Buying steel is different. Meridian doesn’t get a firm price until after they’ve received the steel. “When our forklift touches the truck, they time stamp the weight bill,” Lockhart says. Then Meridian is charged the price that was in place at exactly that time. “They give us a ballpark price in advance,” he says, “but we don’t actually know what it’s going to be until it’s delivered.”

While farmers could stockpile fertilizer in case of a future price increase, Meridian doesn’t have that option. Steel suppliers ration Meridian’s supply based on previous use or future projections.

“We’ve been blessed over the decades as a company,” Lockhart says, “But this is one of the things management and ownership have to deal with.

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Vincent Cloutier

With nearly 20 years of experience in the Canadian agri-food industry, Cloutier is a member of National Bank’s Agriculture and Agri-Food team. Having served in recent years as senior economist at La Coop fédérée (now Sollio Groupe coopératif) and director of economic affairs at Les Éleveurs de porcs du Québec, he specializes in international trade and agricultural policies.

A graduate in agronomy and agri-food management from Laval University and a four-time participant in the prestigious Harvard Agribusiness Seminar, Cloutier supports National Bank’s agricultural and agri-food financing teams with his expertise in business environment analysis.