U.S. Grain Farmers Dealing with the Challenges of Another Bumper Crop
As another bumper harvest is gathered, U.S. grain warehouses are filling up quickly. This is forcing elevators to store soybeans and corn out in the open, despite the risks, and storage facilities to turn away farmers that do not have binding contracts.
High yields and softening exports are causing the grain supply chain to scramble for storage for a third consecutive year. Farmers who are looking to hold off selling their crop until prices indicate a measure of recovery are seeking out storage, but facilities are refusing spot deliveries due to a lack of space, causing concerns within the grain sector that prices and incomes may suffer more than officials forecast.
Minnesota, Iowa, and Nebraska, which combined account for 33% of the U.S. corn output and 25% of the country’s soybean output, have seen record yields after a nearly perfect growing season. The lack of storage is translating into Southwestern Minnesota farmers receiving 15 cents less per bushel for their crops had there been sufficient storage space, according to grain marketing economist, Ed Usset, with the Center for Farm Financial Management at the University of Minnesota.
A combination of market conditions this year is creating a ‘perfect storm’ for U.S. grain farmers that is expected to lead to a 36% decline in farm incomes this year, according to the U.S. Department of Agriculture (USDA). Storage bottlenecks in the U.S. are coming at the same time that South American producers are seeing massive harvests leading to record high global soybean inventories and near record global corn inventories. Meanwhile a strong dollar is putting pressure on U.S. exports at a time when crop prices have already fallen to half of what they were in 2012.
The grain glut, low exports, and lack of storage is proving to be a boon, however, for poultry and hog producers as well as soybean processors, feed producers, and Midwest ethanol plants, who are seeing the lowest prices in years.
There was not a high rate of pre-selling of crops to elevators by farmers this year, meaning that elevators could not sell what was in storage. As farmers prepare for the next growing season, the current situation may encourage farmers to sign forward contracts for next year to guarantee that they can deliver their crops.