Here’s a novel idea….using Buffalo grain elevators for- grain storage! Capitalizing on renewed interest in agriculture and distribution, RiverWright LLC is selling its refurbished “Lake & Rail” grain elevator to a Minneapolis-based investment group. RiverWright, the company developing a $180 million ethanol plant in the Old First Ward, sold the investment group its fourth major grain storage elevator, and its first outside Minnesota.
With record high production and price levels, Midwestern storage sites are overburdened, prompting grain businesses to cast a wider net for storage opportunities. According to the June 5 New York Times article, Food Is Gold, So Billions Invested in Farming:
A few big private investors are starting to make bolder and longer-term bets that the world’s need for food will greatly increase — by buying farmland, fertilizer, grain elevators and shipping equipment…
Grain elevators, especially, could give these investors new ways to make money, because they can buy or sell the actual bushels of corn or soybeans, rather than buying and selling financial derivatives that are linked to those commodities.
When crop prices are climbing, holding inventory for future sale can yield higher profits than selling to meet current demand, for example. Or if prices diverge in different parts of the world, inventory can be shipped to the more profitable market.
“It’s a huge disadvantage to not be able to trade the physical commodity,” said Andrew J. Redleaf, founder of Whitebox Advisors, a hedge fund management firm in Minneapolis.
“From its first stirrings, RiverWright was about re-using the Buffalo River’s vast infrastructure – our grain elevators, rail and river access – by exploring our colorful history as a world-class grain port and processor. This deal adds direction, credibility and opportunity to continue along that course,” said RiverWright founder Rick Smith III.
Smith acquired four then defunct elevators off Childs Street along the Buffalo River in 2005 and founded RiverWright with Kevin Townsell to develop the site for the ethanol production.
The first step was to restore the Lake & Rail elevator, which ConAgra last operated in August 2001. In October 2007, the elevator reopened for grain shipments and brought in one million bushels of feed corn by rail. That feed corn is now shipping out to supply the new WNY Biofuels ethanol plant in Medina. It now joins two other functioning grain elevators in Buffalo, the General Mills elevator and the Archer Daniels Midland elevator, formerly known as the Standard.
RiverWright, in the course of discussions about its own feed corn procurement needs for ethanol production, started talks with grain industry leaders to see if any wanted to come to Buffalo to partner and invest in the grain storage and handling business, to help rebuild and restore the elevators and the marine and rail infrastructure that feeds them.
Those discussions led to the deal, signed Tuesday, to purchase the Lake & Rail elevator and invest in further improvements of the elevator and surrounding infrastructure. The investor declined to make its involvement known publicly. The sales price was also not disclosed.
RiverWright and other partners will continue to develop the site and additional grain infrastructure in preparation for the ethanol project.
“This sale speaks directly to RiverWright’s potential as a green economic development force, beyond producing ethanol,” said RiverWright President Greg Stevens. “This is all part of the strategic plan to bring in grain-related partners to co-develop the resurgence of Buffalo’s grain storage and handling industry.”
Site preparations for the new ethanol plant also continues. Plant construction is scheduled to begin later this summer, with a target completion date of December 2009.
On April 22, RiverWright announced that Corpfinance International Ltd. of Toronto, Canada, had been engaged to arrange up to $120 million of senior debt financing for the project.
At the peak of the city’s grain boom, two dozen working grain elevators preserved massive cargoes of wheat, barley, corn and soybeans; some 4,000 employees worked in local mills. With the rising value of grain, Buffalo’s grain elevators have become potentially more valuable and in demand.
Entry image by Karl R. Josker