Minding the storage: make plans now for big harvest

Farmers are a few months away from harvesting what could be record corn and above-average soybean crops. They might need every day between now and then to figure out where to put all that grain.

Producers should start thinking about their storage options, either on-farm or at a nearby elevator, said Chris Hurt, a Purdue University agricultural economist.

Hurt estimates average Indiana corn yields could equal or slightly surpass the 2001 state record 156 bushels per acre. He projects average state soybean yields of 46 bushels per acre - just 3 bushels lower than the 2001 record. Hurt's predictions are based on recent crop progress reports issued by the Purdue-based Indiana Agricultural Statistics Service (IASS).

In its July 26 crop update, the IASS rated 77 percent of the Hoosier corn crop in good to excellent condition, with 94 percent of corn acreage having silked - 18 percent ahead of the five-year average. The IASS rated 72 percent of Indiana soybean crops in good to excellent shape - 21 percent better than one year ago.

Bumper crops and storage challenges would be a welcome change for farmers who've experienced less than outstanding corn and soybean yields the past few years. Recent average to below-average harvests in many Corn Belt states, coupled with rising grain demands, have depleted the nation's grain stocks.

Those stocks could be rebuilt this fall if the favorable crop conditions continue, Hurt said. About 100 million more bushels of grain might need to be handled in Indiana this fall, he said.

"Corn takes up most of our storage space in the state, so a big corn crop does have implications for storage," Hurt said. "That means that the grain industry is going to have a lot of grain to handle this year. Generally, the grain system has gone to temporary storage outside in piles. I think we'll see more of those piles this year, and the piles will be higher than they were last year.

"From a producer's standpoint, they should be looking at their farm for grain bin capacity. They might make arrangements for space at a grain elevator if there isn't sufficient space on the farm. They'll want to check what those charges are going to be. Usually, the grain industry sets storage rates in August."

A bin-bursting corn harvest likely would trigger an initial dip in cash prices, Hurt said. However, market trends point to a strong price rebound for corn in 2005, he said.

Hurt projects new-crop harvest prices between $2 and $2.20 per bushel, which are near current bids.

"We have a huge U.S. corn crop estimated by the U.S. Department of Agriculture but a very strong utilization base, with ethanol use growing and world corn stocks continuing to be quite tight on through 2004 and into 2005," Hurt said. "This tells us we'll see recovery in price. We'll probably see some widening of the basis levels as we push into the later summer and fall. I think basis levels can still widen by 3-5 cents a bushel."

Farmers also might need to line up space to store soybeans, although Hurt expects the crop won't stay in the bin long.

"We're going from a year in 2003 where we had extremely tight soybean stocks, to almost the opposite situation with the 2004 crop," he said. "We're anticipating a record U.S. crop - probably over 3 billion bushels - and then the potential to follow with a tremendous record crop in South America in our late winter and early spring. If we see those things occur, then world stocks of soybeans could be very large by the time we get into the summer of 2005."

A soybean glut could send cash prices tumbling to $5.50 a bushel by winter, Hurt said.

"I think we're looking for soybean prices at harvest probably in the $5.75 to $6 a bushel range," he said. "There will probably be some rally after harvest and into Thanksgiving, where we could see a 30- to 50-cent recovery in price. That is a tremendous feeling of defeat verses $10 beans this past spring."

Hurt advised soybean growers to watch markets carefully and be ready to sell before year's end.

"Producers should consider short-term storage for soybeans and be pretty cautious about storing beans into the winter," he said. "If they choose to do that, they probably should move cash beans out by around Thanksgiving and then buy call options or replace ownership with futures. That's quite a change from a year ago.

"The good news for Indiana is that we have tremendous crops. That means producers are going to have good revenues. However, with much higher costs of production this year, cropping incomes may be similar to last year."