Commodity Warehousing for Agricultural Products: A Guide
Storage methods are extremely important when dealing with agricultural products. Warehouses that store these types of products must meet specific requirements. They must undergo evaluations to make sure that they are functioning at peak conditions. A facility that does not meet the standards set by the USDA must stop its operations immediately. Let’s dive deeper on commodity warehousing and specifics you need to be aware of when considering a commodity warehouse.
What Is a Commodity Warehouse?
A commodity warehouse is a commercial utility building with a lighter construction. It is lighter than most typical warehouse buildings. These warehouses are best for storing agricultural products. The walls of these commodity warehouses are made of some type of wood or metal over the frame. The warehouse roof is made of either wood or steel, and the floors are made of concrete.
What Are Agricultural Products?
Agricultural products are different types of food products that humans and animals both consume. These products can either be raw or processed. There are about six different types of agricultural product categories. These are the six different types of agricultural product categories:
- Edible forestry
- Miscellaneous products
Certain categories of these items contain several different types of subcategories. For example, items in the crops category include anything from oranges to wheat to herbs.
What Materials Can Be Stored in a Commodity Warehouse?
There are many different types of materials that can be stored in a commodity warehouse. You can even store combustible materials. If your company has any excess products or goods that you don’t want to keep on-site, it is best to utilize a warehouse to store them.
Many manufacturing facilities like to use warehouses to store raw materials. They will use these products in production when needed. If the manufacturer ever faces an influx in orders, they can easily access their material from these warehouses. Warehouse storage helps manufacturers keep up with their demands. It also keeps their business running smoothly. This helps improve customer satisfaction because customers don’t have to wait a long time for their orders. Without this backup, suppliers would have to order these raw materials before they can start up production. Raw material examples:
Other items that classified as raw materials are ball bearings or bolts and nuts. Any items purchased from an outside vendor for production use are raw materials.
The last thing a retailer wants is to lose their customers because the products these customers want are out of stock. When retailers place their excess product in a warehouse, they can replenish their merchandise. Retailers that offer offline purchasing can fulfill their orders directly from their warehouse inventory. Inventory control, or adequately maintaining the amounts of inventory you have, is essential if you are looking to maximize your cost savings.
What Is Included in a Commodity Warehouse Agreement?
A commodity warehouse agreement, also known as a commodity contract, is between the Commodity Credit Corporation and the warehouse operator. These contracts are also known as futures contracts, and they are legal agreements to sell or buy a specific commodity asset at a particular time in the future.
What Permits and Certifications Should a Commodity Warehouse Have?
Warehouse operators that store agricultural products in their warehouses must have the proper licensing from the USDA. These operators must have a license under the United States Warehouse Act. Depending on the type of material that the warehouse operator will house at these warehouses, the operators will need different types of licenses. For example, there are licensing agreements for grain and rice operators and specific licensing for those who house cotton in their warehouses.
What Is a Warehouse Receipt?
A warehouse receipt is a document used to guarantee that the quality and quality of a specific type of product is properly stored within a USDA-approved facility. These receipts are significant because they serve as proof that these commodities, or these products, are in stock at these warehouses. It also indicates that the proper documentation for these commodities has been verified. Warehouse receipts also allow for the transfer of commodity ownership without having to move the commodity. Some of these receipts are negotiable, and others are not. Negotiable receipts allow the opportunity to use these receipts as collateral for loans.
What Fees Are Associated With a Commodity Warehouse?
Depending on which state your commodity warehouse is located, your fees may vary. Oftentimes, the licensing fee associated with a commodity warehouse costs around $400 to $1000. In certain states, if you already have a federal U.S. Warehouse Act License, you do not need to apply for a state warehouse license. In addition to licensure, these warehouses need to carry insurance. Warehouses have the option to either obtain a surety bond, letter of credit, certificate of deposit, or they need to purchase insurance from an approved insurance company.
What Is the Average Size of a Commodity Warehouse?
The average commodity warehouse is around 25,000 square feet. The size of the warehouse and the warehouse design also depend on the type of material that will be housed inside the warehouse.
Food product distribution and storage requirements vary significantly from other raw materials that can sit for longer periods. When choosing your warehouse, it is essential to make sure that they have temperature and climate controls. Many people confuse temperature control and climate control together, but they are two different entities.
Temperature Controlled Environments
Temperature control is a general term that describes a specific temperature range that the warehouse operator must keep consistent for most products. Temperature-controlled environments use specialized heating or cooling units to keep the temperature in the warehouse within a specific range. Common warehouse temperature ranges:
- Cold or Frozen with a temperature at or below 32°F
- Air-conditioned temperatures range between 56°F and 75°F
- Ambient refers to the natural untouched temperature in the warehouse
- Refrigerated temperatures range between 33°F and 55°F
Confectionery products such as cotton candy, lollipops, or chocolate must be kept in air-conditioned temperatures. This is because the sugars in these products cannot stand extreme heat or freezing temperatures.
Climate Controlled Environments
In climate-controlled storage areas, the temperature and the humidity level of the storage are both controlled. Commercial-sized dehumidifiers and humidifiers ensure that the humidity in the room stays within the required range.
Temperature mapping uses sensors to measure the temperature in different areas of the warehouse to measure the temperature in other areas of the warehouse. Make sure that the warehouse that you pick temperature maps several times throughout the year. Temperature mapping helps the operator adjust the heating and cooling equipment based on the results from the test.
Food Safety Planning
Food producing companies must have a food safety plan for storing their products. The FDA recommends that these plans have a hazard analysis, a plan for managing these preventative controls, and a list of preventive controls.
Questions to Ask Warehouse Providers
Before you decide on a warehouse provider to house your products, there are a few questions you will need to ask before you make your final decision. For example, you will need to ask if they have the capability to store different types of temperature ranges. Some providers can handle all the different kinds of temperature ranges you need within the same warehouse. Finding a reputable warehouse that can handle all your temperature ranges will help eliminate the costs associated with outsourcing to other warehouses.
It is essential to ask the provider what plans they have in place if the temperatures leave the recommended ranges? Your provider should let you know that they have the proper monitoring systems in place for these types of scenarios.
Possible Health and Sanitization Issues
Every single food storage warehouse should have health and sanitization procedures set in stone for their operations. If a warehouse operator dodges your questions and concerns about how they sanitize, you may want to consider using a different provider. If a warehouse does not correctly sanitize their storage units, they risk exposing your goods to rodents or other pests. They could also expose food products to contamination by fungi and bacterial growth.
Agricultural Product Commodity Warehousing
Ensuring that your agricultural products meet the proper temperature and storage requirements is not only vital to your business operations but your customer satisfaction ratings. The last thing you need is for your products to go bad due to improper handling.
Contact us now if you are looking for more information on the best warehouse options for and your products. We here at Carroll Trucking have the experience and the space to handle your commodity warehousing needs.