Bin-Busting Bushels

A huge U.S. corn crop is expected to strain storage and pressure prices. This article appears in the October print issue of Ethanol Producer Magazine.
By Ann Bailey | September 19, 2016

U.S. farmers will harvest a mammoth corn crop this fall. USDA estimates the 2016 harvest will total 15.2 billion bushels—the largest on record. As of late summer, USDA estimated that yields would average 175.1 bushels per acre, 6.7 bushels per acre more than last year and 4.1 bushels per acre higher than the previous record yield set in 2014, according to the agency’s Aug. 12 crop production report.

Not only is this year’s U.S. corn crop a bin-buster, but there still are a lot of bushels on hand from previous crops in the United States and across the globe. U.S. corn supplies for the 2016-’17 marketing year, which runs from Sept. 1 to Aug. 31, are projected at a record 16.9 billion bushels, 1.5 billion bushels more than the previous marketing year, the USDA World Agriculture Supply and Demand Estimate said.

Large planted acreage and good growing conditions combined to produce the bumper corn crop. Unlike last year, when corn growing conditions in the eastern Corn Belt were poor, this year, pretty much the entire U.S. had favorable weather for corn production. Corn growing conditions in other parts of the world also generally were good this year and USDA raised foreign production by 2.1 million metric tons in the August WASDE report, noting that the ample corn crops in Argentina, India and Mexico offset smaller crops in Canada, Spain and France.

Storage Outlook
During the past 50-plus years, corn storage in the United States has increased, says Darrel Good, extension agricultural economist at the University of Illinois in Champaign-Urbana. “It clearly has grown over time as production has grown, both commercially and on-farm,” he says.

Moderate harvest corn bids and some positive carry in the corn market made it more attractive as of late August to store the 2016 corn crop than soybeans, Good noted in an Aug. 22 weekly outlook in FarmDoc Daily. If the average basis in south-central Illinois strengthened to about 10 cents by spring 2017, as it has during the past two years, the market was offering farmers about 40 cents per bushel to store corn between harvest and late spring, he says.

Sukup Manufacturing Co., whose products include grain storage facilities, has increased its sales of commercial storage bins over the years, says CEO Steve Sukup.  Located in Sheffield, Iowa, and founded in 1963, the company supplies grain bins, dryers and handling equipment. “Our commercial market bins are approaching 50 percent of our sales market,” says Sukup, “It’s been very strong. It matches up to our bucket elevators and conveyor units that we have for our commercials.”  The bulk of both Sukup’s commercial and on-farm bin sales are in Iowa, Minnesota, North Dakota, South Dakota, Nebraska, Illinois, Indiana and Ohio.

In early August, sales of on-farm storage bins continued strong and farmers were assessing whether they needed to add more storage to accommodate the 2016 crop, Sukup says. “I think they’re taking a good look at it. We’ve had good activity,” he says. The capacity of the steel bins the company manufactures for farmers range from 5,000 bushels to 1.5 million bushels, Sukup says.

Ken Hellevang, an extension engineer in the North Dakota State University Agriculture and Biosystems department says it appeared in August that there still was a fair amount of corn in storage on farms in the Corn Belt. A Wisconsin farmer told him in August that he was moving last year’s corn into various facilities in preparation for this year’s corn harvest, Hellevang says.    Meanwhile, Hellevang heard reports of “wheat being piled in the street,” he says. “That indicates there’s a lot of grain, in general, that is going into storage.”

Short-term Issues
Hellevang advises farmers who are considering alternative forms of storage for their grain to, first, look at trying to provide a storage environment that would be similar to that of a grain bin with the ability to move air through the grain, control the temperature and work with the moisture content of the grain. Doing so will help prevent spoilage issues that will damage the grain, if it’s not stored properly.

One of the popular locations farmers choose to store grain is in a building such as a pole shed, he says. If they are considering that, they need to be aware that grain will put pressure on the walls and determine whether they can withstand that. Meanwhile, the pole shed probably is not set up for the grain to air dry, so farmers will need to make sure they store only dry grain in the building, Hellevang says.

Another alternative storage option for farmers is grain bags, Hellevang says. However, the bags require special equipment to fill and, like pole sheds, don’t permit storage of high-moisture corn. The bags also are vulnerable to insect infestations. “Even grain bags need to be considered as short-term storage,” Hellevang says.

Hellevang strongly discourages farmers from storing corn outside in piles on the ground. Besides the potential for spoilage and insect damage, corn stored outside can get debris and rocks mixed it with when the grain is being picked up. Even if farmers put down plastic on the ground before they pile the grain, that’s not necessarily a solution because the plastic can rip, Hellevang says.

Another potential problem that can arise from outdoor storage on the ground is damage from precipitation, he says. One inch of rain on the top foot of a corn pile raises the corn’s moisture by 9 percent, he says. That means that even if the corn was piled with a moisture content of 15 percent, the moisture content would increase to 24 percent at the top. With that high of moisture content, the top 2 feet of corn piles would spoil over time, resulting in a huge economic loss to a farmer, Hellevang says.

“Any time that we’re dealing with alternative storage, that increases the potential for problems,” Hellevang says. Those problems, of course, can eventually be passed on to the livestock or ethanol industry corn buyers, he notes.

Price Outlook
With the huge U.S. corn crop and large amount in storage, USDA lowered its estimated national average farm-gate prices in the August WASDE report. The agency reduced the season-average price farmers received to $2.85 to $3.45 per bushel. That range of prices represents a reduction of 25 cents on both ends and a 45-cent reduction at the midpoint from the $3.55 to 3.65 per bushel that is expected for the 2015-’16 marketing year, the WASDE report said.

In late August, depending on where farmers were located, corn prices already were moving to $3 per bushel or lower for harvest bids, Good says. That means ethanol producers may have an opportunity to purchase corn at a moderate price. “If the corn crop is confirmed as big as expected and we get some price movement around the basis, then corn will be attractively priced at harvest time,” he says.


Author: Ann Bailey
Associate Editor, Ethanol Producer Magazine
abailey@biinternational.com
701-738-4976