Farmers face unique pressures; Massive corn harvest could affect prices
Published 8:05 am Wednesday, October 1, 2014
By Tom Webb
St. Paul Pioneer Press
The huge piles of corn are coming.
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Minnesota’s fall harvest has begun, and when the combines are finished, immense piles of corn are likely to dot the countryside. Here’s why.
— The crop is massive. Minnesota’s corn crop looks to be the second largest in history, 1.36 billion bushels. And the U.S. corn crop will be so gigantic, it will shatter every record in the book at 14.4 billion bushels.
— Grain prices are low. The huge crop has pressured grain prices, with corn now fetching less than $3 a bushel in Minnesota. When prices are low, farmers avoid selling their grain.
Instead, they’ll store it and hope for better days. Bob Zelenka, head of the Minnesota Grain and Feed Association, expects farmers will first fill their on-farm bins, then take grain to the local elevator. Once those elevators are full, the only storage left is piling it on the ground.
“I think we’re going to see some ground storage this year, because of the lack of interest by producers in moving grain into the market,” Zelenka said Tuesday.
— The railroads are packed. Even before the harvest began, railroads were struggling to keep up with demand for shipping Bakken crude oil, coal, taconite and other commodities, especially in North Dakota.
After last year’s harvest troubles, the grain industry sounded the alarm early this year. Zelenka gives the railroads a certain amount of credit for trying.
“It appears to be more manageable than last year, because we’re all aware of the situation,” Zelenka said.
But there will still be delays, he cautioned.
— The Corn Belt is growing. North Dakota used to be a wheat-growing state. Now climate change and better seeds are making it a corn and soybean state, too. That’s putting new stress on the Upper Midwest’s grain-handling network, because there’s more grain to move and less time before winter hits.
“This is the first time we’ve had a corn and soybean (shipping) problem in North Dakota,” said Jerry Fruin, a specialist in transportation economics at the University of Minnesota. “We used to talk about wheat, but that (harvest) happened in August when the weather was better.”
— Routes to Asia are hectic. Asia is a huge market for U.S. grain, and most of it moves from the Midwest to ports on the Pacific Ocean. That adds pressure to busiest parts of the rail network, even as the rise of corn-based ethanol eases demand in other regions.
The rail issues “are not equally allocated across the grain belt,” Fruin said. “They’re in North Dakota and South Dakota and Minnesota, not in Illinois and Iowa. Fifteen years ago, it would have been Illinois and Iowa that were screaming.”
— Options and issues. Minnesotans can and do ship commodities by barge down the Mississippi River. When they can.
“It has not been a good year for barges, because of a few lock breakdowns and a dredging problem we had when the channel got silted in,” Fruin said. “I think it’s all going strong now, but we’ve only got six (more) weeks to move grain by barge” before winter sets in and the river freezes.
Shipping grain by truck is also an option for shorter trips, but “fuel is up, and we don’t have a lot of excess truck capacity like we do in some years,” Fruin said.
— There are leftovers. Farmers are starting to harvest the 2014 crop, but a chunk of 2013’s grain is still in storage. In Minnesota, 162 million bushels of old-crop corn was on hand Sept. 1, the U.S. Department of Agriculture said Tuesday.
That’s 60 percent more than last year. So when newly harvested corn starts to pile up by November, that’s another reason why.
—Distributed by MCT Information Services