Corn growers across the United States have an eye on the stock market, their fingers crossed for a little luck and bins full of the 2013 harvest waiting to sell.
Faced with the lowest corn prices in more than three years, local farmers are holding on to their harvest in hopes of a recovery of one of the poorest performing commodities in 2013.
“I’m nervous about prices, especially since last year was really good,” said area farmer Rich Downing. “Nothing says the price has to go up.”
Gavilon manager Dean Michaelson said the biggest risk is the price could just continue to go down. If farmers are paying storage at the elevator, the long-term cost could outweigh the slight recovery in market price.
Another risk for stored grain is crop rot. Michaelson said some of the corn in the bins has about 17 to 18 percent moisture, and if it remains in storage this summer, high temperatures could damage the grain.
Farmers are allowed 5 percent damage before getting docked. For example, corn with 10 percent damage would be penalized about 10 cents per bushel.
After hitting a record $8.31 per bushel in 2012, prices hit a 38-month low at $4.15 in November before recovering about 4 percent ($4.28) to end 2013.
Market prices quoted corn at $4.26 at Gavilon and $4.30 at Farmer’s Cooperative this morning.
While prices were high, farmers took advantage by building more storage space, increasing their capacity to almost 13 billion bushels. The storage boom is an increase of 10 percent from five years earlier.
The U.S. Department of Agriculture (USDA) estimated farmers will have double the amount of corn in storage next summer.
Downing and his family operation added several storage units to their rented and owned farms, including two 75,000 bushel bins.
By stashing the grain rather than selling, farmers are taking a risk that prices may not bounce back, especially if competitive producers in South America have a large harvest.
Hoarding the harvest also puts livestock producers, ethanol companies and food producers to pay a premium in order to secure corn.
Michaelson said China is withholding buying corn and dried distillers grains (DDGs) from the U.S. because of a variety of genetically-modified corn that has not been approved, adding more pressure to the market.
Beans also took a dip in price after breaking the $13 barrier around Christmas. Markets reported the price at $12.60 at Gavilon and $12.32 at Farmer’s Cooperative this morning.
Downing was one of the lucky area farmers to pull the trigger and sell a majority of their bean harvest while the price was above $13.
The USDA will release a supply and demand report on Friday, updating farmers on carry out numbers. If the amount continues to be around two billion, Michaelson said it will be hard for prices to rally.
“Most people are storing what they can and hoping for a little better price,” Downing said.
With the 2014 growing season approaching, an average yield could pressure the market to continue the downward trend. Early estimates predict prices could dip below $3.50, the lowest since June 2010.