US Farmer’s Grapple With Over Abundant Grain Supply
$CORN, $WEAT, $SOYB
There is a bumper harvest of US grain, so big that they are storing Soybean and Corn out in the open despite the risk of damage. Some are even refusing crops from farmers without binding contracts.
The scramble to find storage in some areas of the nation, a consequence of high yields and weaker-than-expected US exports partly due to the GMO nature of the grains, means the outlook for farm incomes and prices will become bleaker than government forecasts suggest.
Growers want to store as much of their crops as possible, but warehouses are rejecting spot deliveries because of a lack of space.
“We’re out of storage,” said a Minnesota farmer who also co-owns a grain elevator. “Our next best option is to find a place to sell it, so you get that harvest pressure.”
Minnesota, Iowa and Nebraska, which account for a 33% of US Corn and 25% of Soybean output, have produced record yields thanks to near-perfect conditions after some bad weather early in the growing season suggested yields could fall.
As a result, farmers in southwestern Minnesota are getting paid about 15 cents less per bushel for their Corn and Soybean than they would if there was enough space, estimates the grain marketing economist for the Center for Farm Financial Management at the University of Minnesota.
That means an even deeper damage to farm incomes given the cash price for Corn in the area is about 3.25 a bu, already well below the estimated 4.00 production cost due to the cost of corporate controlled seed, fertilizer and pesticides.
Storage pressures in Missouri and Illinois were probably worse last year, when average Corn yields in Illinois were about 30 BPA higher than they are this year.
A bigger concern is the challenges presented by having record yields in some parts of the nation, while others have experienced a dip in yields because of the wet growing season.
According to the US Agriculture Department (USDA) poor returns could prompt farmers to idle some of their less-productive farmland next Spring or devote more to crops that are cheaper to sow like Sorghum. They may also cut back on fertilizer or premium seeds, which could drag down yields. For now, they are struggling to make space for record harvests or trying to sell it, even if it means taking a further hit.
Chicago Board of Trade (CBOT) futures rose across the board Friday as global farmers are slowing down the pace of selling grains, and the USD showed weakness, lifting Dollar-dominated agricultural commodities.
The most active Corn contract for Dec delivery added 2.25 cents, or 0.59%, to close at 3.8225 bu.
Dec Wheat delivery gained 7 cents, or 1.36%, to close at 5.22 bu.
Jan Soybeans rallied 5.5 cents, or 0.62%, to close at 8.8575 bu.
Chicago grains extended their rally although the pace of US Corn and wheat exports was well behind last year, and US crop prices were still much higher than offers quoted by other world major exporters.
Agriculture analysts suggested that farmer retention of grain has been dominant in the US and around the world. They said the hoarding has compressed commercial grain merchant margins and forced the cash market to pay up for supply.
Have a terrific weekend.
HeffX-LTN
Paul Ebeling
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