Rating Manual section 6 part 3: valuation of all property classes

Section 460: grain silos

This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.

1. Scope

This section applies to premises which are primarily used for the storage of grains and pulses.

Grain stores generally fall into 2 categories.

  • Grain silos are specialised upright structures. The first were built in the post-war period by the MoD and are generally of concrete construction. They are often over 100 feet in height, and the interior is divided into upright holding bins with hopper bottoms for delivery of the stored product to the transport facility at the foot of the tower. The later upright silos tend to take the form of free-standing steel bins. This form of construction is much cheaper, but the useful life is shorter. Such bins are generally freestanding, and are often flat-bottomed construction mounted on a dished concrete base. The grain is moved by a sweep auger within the bin and carried by conveyor to the transport facility. Some steel bins are hopper-bottomed, and mounted on a steelwork support structure. Hopper-bottomed bins tend to be smaller than the flat-bottomed version, and they are considerably more expensive.

  • Flat-bed grain stores generally take the form of a portal-frame warehouse, although they are generally of much more basic construction – unheated, unlined and no natural light etc. So that bulk products can be stored to a reasonable height, flat grain stores will have thrust walls (sometimes called grain walls) to a height of 2.50 – 3.65 metres. Some will have a vented floor to aerate the product, but most have fans in the thrust walls and venting is by means of removable pipes.

1.1 General Description

During the harvest period, grain is delivered to the store from the farms, and the amount delivered at a time varies considerably. On arrival at the grain store, grain is inspected for quality, weighed, and tested for moisture content. In the larger types of silos, grain is delivered direct from the lorries or other conveyances into hoppers with a mechanical feed to automatic weighing machines. From there the grain passes to the reciprocating screens, which remove chaff, small stones, mud, dust, straw and very small grains.

The grain is then passed to bins, which may be square, round, hexagonal or octagonal and may be constructed of reinforced concrete, steel, brick or timber, or it will pass into a flat store prior to entering the drying process. Grain is fed into bins by a manhole in the roof of each compartment and the bins are fitted with either sweep augers in the base or hopper bottoms which discharge into conveyors. In the case of flat stores, the movement of the grain is usually by mechanical shovel. In the better silos thermometers are permanently fitted inside the bins at regular intervals throughout the height in order that a constant check can be kept on the condition of the grain.

If the moisture content (mc) of grain exceeds 14.5 per cent there is danger of deterioration and therefore adequate drying facilities are important. Below 14.5% mc for cereals no storage fungi will grow and mites are unable to breed. Note for oilseed rape optimum mc for storage is 7.5-8%, however below 6% the Rapeseed becomes very brittle so over drying can be a problem.

If required the dryer is put in operation and the grain is passed through a sufficient number of times to reduce the moisture content to about 15 per cent. The most moisture a dryer can normally remove at a single drying is about 6 per cent. Once the moisture content has been reduced to not more than 15 per cent the grain can be kept in the bins or the flat store for a season at least although it is generally considered advisable to move the grain from one bin to another occasionally to aerate it and keep it in top condition. Where the grain is not the property of the silo operator each parcel of grain cannot be kept separate and each person delivering grain has a stake in what is called the “silo grain”. This stake is determined having regard to the amount delivered less a certain percentage to cover the drop in moisture and reduction in bulk due to screening.

Temperatures above 15 deg C increase the risk of insect and mite populations developing so cooling of grain should commence as soon as the grain comes into the store. Adequate ventilation provision is essential particularly in flat stores where grain is often not moved until required by the end user. Note malting barley is often not cooled to below 10 deg C otherwise secondary dormancy may be induced.

2. List Description & Special Category Code

List Description : Grain Store and Premises CW3

In the case of grain silos (upright stores and bin nests) Special Category Code 119 should be adopted. Suffix S.

In the case of grain stores (flat-bed type) Special Category Code 120 should be adopted. Suffix S.

3. Responsible Teams

The valuation and referencing of this class of property is the responsibility of the specialist team within the Non Domestic Rating Unit. The CCT will nominate a member to oversee and co-ordinate the valuations of both grain stores and grain silos

4. Co-Ordination

The Grain class co-ordination team has overall responsibility for the co-ordination of this class. The team are responsible for the approach to and accuracy and consistency of grain stores and silos valuations. The team will deliver Practice Notes describing the valuation basis for revaluation and provide advice as necessary during the life of the rating lists. Caseworkers have a responsibility to:

  • follow the advice given at all times – Practice Notes are mandatory

  • not depart from the guidance given on appeals or maintenance work, without approval from the co-ordination team

  • seek advice from the co-ordination team before starting on any new work

There are no separate legal considerations for this class.

6.Survey Requirement

All grain stores should be measured to GIA in accordance with the VOA code of measuring practice.

The survey should be undertaken on the assumption a full contractors test valuation will be carried out. Comprehensive details of Plant and Machinery will be required.

The survey should contain detailed notes as to the construction, age, height and services of any structures on site together with any refurbishment details.

All site works should be individually surveyed and detailed separately

The diameter is a factor in the cost of a bin, so it is important to obtain full size details. Information regarding the capacity of bins is often given in wheat or barley tonns. As a rough guide, conversion to m3 (all costs in the RCG for bins are in m3) is as follows:

  • Wheat - 1 tonne of wheat takes up 1.30 m3

  • Barley - 1 tonne of barley takes up 1.45 m3

Steel silos sometimes comprise a number (nest) of bins enclosed by a roof and cladding to the elevations giving the appearance of a building. The section, volume and number of bins need detailing as well as supporting features including cladding, cat walks and ladders etc.

Even if silos of a smaller size than referred to in the Regulations are found (400m3) these should be fully referenced, having regard to full details of installation to enable an accurate view to be formed as to whether they could be removed without substantial demolition of the silo or the surrounding structure.

7. Survey Capture

All survey details should be recorded electronically on EDRM and stored in the property file

8. Valuation Approach

Very few grain silos have ever been let in the market, and those that have will usually have been let under unusual terms. There will however be some rental evidence in the market for flat-bed grain stores.

The decision as to how to value a grain store is crucial, because the approach is different for the 2 main types of facility. If the store comprises mainly a silo or a nest of bins, the valuation is likely to be by the contractor’s basis, even if there is a flat store and other buildings on site. There is a cost in the cost guide for a flat store when valued along with a silos/bins using the contractor’s basis, and also costs for ancillary buildings. On the other hand if the store is mainly of the flat bed type the valuation will be by rentals comparison.

8.1 Grain Silos – Contractor’s Basis

Grain Silos should be valued on the contractor’s basis. Reference should be made to Rating Manual: section 4 part 3, and to the relevant practice note for this class.

8.1.1 Stage 1 – Estimated Replacement Cost (ERC)

All the buildings, civils and rateable items of plant and machinery commonly found in this type of property should be costed from the costing information provided in the Rating Cost Guide for the relevant revaluation period.

Adjustments to the costs where appropriate, are required for location, contract size and fees. These should be in accordance with the advice contained in the appropriate rating cost guide unless specifically stated in the relevant practice note for this class.

8.1.2 Stage 2 – Adjusted Replacement Costs (ARC)

The guidance for making adjustments to reflect obsolescence and age related disabilities is set out in the Rating Cost Guide for the relevant revaluation period

8.1.3 Civils Ancillary to Plant Items:

All the civil works which are directly ancillary to plant items such as steel supports, concrete bases/foundations, bund walls and bund bases should generally follow the allowances made on the items to which they relate i.e. a concrete base for say an oil tank would receive a similar allowance to that given for the oil tank. This applies even if the item itself is not rateable because of its size.

8.1.4 Site Works

Allowances for items of site works which serve the property such as yards, parking areas, landscaped areas, open storage areas, boundary fencing, underground site services and lighting should be based having regard to the following:-

  1. Where the items of site works serve a particular building the allowance should follow the allowance made on the building to which they relate.

  2. Where the items of site works serve the property as a whole the allowance should be based on the overall average allowance derived from the allowance made for all the buildings, civil works, plant and machinery items present on the site

8.1.5 Stage 3 - Estimation of Cost of the Land.

The value to be adopted for the land should be on the basis of a cleared site with such services, as existed at the relevant date, available for connection and with planning permission for grain storage reflecting all advantages and disadvantages of the site and its location. This will normally follow general industrial value for the size of site in the locality where the provender mill is situated.

Allowances for the land should be based on an overall average allowance derived from the individual allowances made at Stage 2 for the buildings, civils, and rateable items of plant and machinery situated on the site.

For further background information reference should be made to the Rating Manual: section 4 part 3 - part 6.

8.1.6 Stage 4 -Decapitalisation Rate

The relevant Statutory Decapitalisation Rate for this class of property must be adopted.

8.1.7 Stage 5 – Overall Consideration

This is often referred to as the “standback and look” stage. At this stage of the valuation care must be taken to ensure that adjustments are only made for matters which have not already been allowed for at stages 2 and 3.

Typically matters to be considered at this stage concern whether or not any end adjustment to the valuation should be made. Such matters for consideration at this stage would be in respect of disabilities that effect the site as a whole such as layout and access. Care should also be taken to avoid double counting where disabilities are already reflected in the site values.

8.2 Flat-bed Grain Stores – Rental Comparison Approach

This type of facility will be valued on the rental comparison method of valuation. It is important to verify the planning situation. Because of the nature of this type of property, the planning is often restricted to the storage of grain, seed and pulses only. This factor restricts value, and the most likely source of rental evidence will be open market lettings of properties with similar restrictions. If the property has no such planning restrictions and could be used for warehousing, the level of value should fall into line with the local levels of value

All buildings should be measured to GIA and the subsequent survey data entered into the Rating Support Application using a bulk class of M and the sub location 3GRS. Address-based matrices should be created, driven by sub location code and linked to scale VXFGIA1.

8.3 Valuation Considerations

8.3.1 Comparison

The following factors will need consideration when determining the relative value of or making comparisons between grain silos:-

  • the silo should be in a satisfactory position relative to the markets for which it caters;

  • adequate transport facilities should exist by road, rail or water;

  • adequate handling equipment is necessary in order to provide flexibility of operation;

8.3.2 Surplus Capacity

It may be claimed on behalf of the occupiers that there is an excess of capacity in a particular silo. Regard should be had to the average of the last three to five years’ intake of grain rather than rely solely on the full capacity of the silo.

It is important to remember, however, that a silo must be capable of taking in its entire stock of grain in a comparatively short period of the harvest and for this reason the handling capacity of the dryers and plant must be much higher than would be necessary for more regular operations. Thus although a large amount of the plant may only be in operation for a small part of the year this is to be expected with this class of hereditament and no allowance falls to be made on this account.

8.3.3 Substitute Approach

When valuations are carried out on the contractor’s basis it may be necessary to have regard to a substitute building approach. Many inland concrete silos which were built up to the 1960s continue in use simply because they continue in existence. Consideration should be given to substituting these with a modern steel substitute for valuation purposes.

The size of bins reflected in the substitute will need to be tailored to reflect the nature of the use of the actual silos. This may mean several smaller bins where a variety of grains are stored or fewer larger bins for bulk storage.

This approach should not be adopted where attack from sea salt is likely, and where construction in reinforced concrete still occurs.

9. Valuation Support

If a full contractor’s basis is adopted. All valuations should be carried out using the ‘Generic Contractor’s Basis’ spreadsheet, which is available on the non-bulk server.

If a valuation on a rentals approach is adopted valuations should be carried out using RSA.Additional Plant & Machinery should be valued using the Non Bulk Server.

Practice note: 2017: grain silos and stores

1. Market Appraisal

1.1 April 2015 (Growing Season 2014)

Wheat and barley are the main grain crops produced in Britain. Wheat is of 3 main types – milling wheat for human chain foods, feed wheat for making animal feed and durum wheat for pasta production.

The 2014 wheat harvest for the UK was 16.6 million tonnes, an increase of 39% on 2013. The increase in production was as a result of an increased in planted area. The planted area of wheat in 2014 has returned to an area similar to that seen prior the prolonged wet weather in 2013. The planted area has increased from 1.6 million hectares to 1.9 million hectares in 2014. Yields have been above average in 2014. Wheat yields have increased to 8.6 t/ha from 7.4 t/ha in 2013 an increase of 16%.

Barley production for 2014 has shown a decrease of 2.6% to 6.9 million tonnes in 2014 from 7.1 million tonnes. The spring barley planted area has decreased in 2014 by 28% to 651 thousand hectares from 903 thousand hectares in 2013. The area of winter barley has increased by 38% to 429 thousand hectares. These changes can be attributed to the favourable conditions in 2014 allowing a recovery of winter crops from the difficult planting conditions through the winter of 2013. Barley yields have benefited from favourable conditions in 2014 increasing by 9.5% to 6.46 t/ha from 5.8 t/ha in 2013.

(source : Farming Statistics – DEFRA – published Dec 2014)

London Wheat Futures peaked in April 2014 at £169.62 the before falling back to £107.75 the in September 2014. As at April 2015 futures are trading at £125.63 te

Current Ex Farm wheat prices (April 2015) are £156 / tonne for milling grain and £115 / tonne for feed wheat.

1.2 Comparison with April 2008

Milling wheat reached almost £200 / tonne in March 2008 and feed wheat reached £182 / tonne. However the market had peaked and prices fell away in April, the price of grain has continued to fall, and at Oct 2008 wheat prices were at £137 / tonne for milling wheat and £87 / tonne for feed wheat.

Total wheat production in 2007 was 13.4 million tonnes with an average yield of 7.3 t/ha. Total barley production on 2007 was 5.1 million tonnes feed barley at October 2008 was £88.3 te

(source of data : HGCA Market Data Centre UK Ex Farm Prices England and Wales)

1.3 Overview

The key economic benefit of grain storage is not having to sell grain for harvest movement, typically selling grain later will attract a premium over the harvest price. However due to the increased yields and an increase in the planted area significant amounts of grain were put into storage in August/September 2014 with many co-operative stores reported as having little or no excess capacity. Feed wheat post harvest was approximately £110 te (Ex-Farm Prices) rising to £132 te in December 2014, giving a premium for stored product. However since December prices have fallen to £115 te (April 2015),

2. Changes From Last Practice Note

The valuation approach is unchanged from the 2010 practice note, grain silos being valued by reference to the contractor’s basis.

3. Ratepayer Discussions

There have been no central discussions with representatives for the industry nor are there any identified agents for the industry. Consequently you are advised, in the absence of any agreement, to adopt the basis as outlined below.

4. Valuation Scheme

4.1 Valuation Scheme

Very few grain silos have ever been let in the market, and those that have will usually have been let under unusual terms. Therefore the valuation of grain silos is by reference to the contractor’s basis.

The contractor’s basis of valuation should proceed in accordance with the general advice contained in Rating Manual; section 4 part 3 using the accepted five stages.

Reference should be made to the 2017 cost guide for costs, allowances and additions.

The appropriate statutory decapitalisation rate must be adopted at stage 4.

All valuations must be carried out using the generic contractor’s basis spreadsheet which is available on the non bulk server