By Jeff Wilson, Lydia Mulvany and Megan Durisin – Aug 22, 2014
The ripening corn and soybean fields stretch for miles in every direction from Dennis Wentworth’s farm in Downs, Illinois. As he marveled at his best-yielding crops ever, he wondered aloud where the heck he’ll put it all.
“Logistics are going to be a huge problem for everyone,” the 62-year-old grower said, adding that he has invested in boosting output rather than grain bins. When harvesting starts in a few weeks, Wentworth expects his 150-year-old family farm to produce 10 percent more than last year’s record. “There are going to be some big piles of grain on the ground this fall.”
From Ohio to Nebraska, thousands of field inspections this week during the Pro Farmer Midwest Crop Tour show corn output in the U.S., the world’s top producer, will be 0.4 percent above the government’s estimate. Months of timely rains and mild weather created ideal growing conditions, leaving ears with more kernels than normal on 10-foot (3-meter) corn stalks and more seed pods on dark, green soy plants.
Prospects of bumper harvests sent Chicago futures tumbling into bear markets last month, two years after a drought eroded output and sparked the highest prices ever. Cheaper grain is bolstering profit for buyers including Tyson Foods Inc. and Archer-Daniels-Midland Co. (ADM), encouraging some cattle producers in the Great Plains to expand herds, and eroding income for farmers who say increased output will make up for some of the slump.
Corn on the Chicago Board of Trade has tumbled 20 percent since the end of May, closing at $3.715 a bushel today, and soybeans are down 30 percent to $10.42 a bushel. The Bloomberg Commodity Index slid 6.3 percent over the same period, while the MSCI All-Country World Index of equities rose 1.7 percent. The Bloomberg Treasury Index gained about 0.6 percent.
Samples in Illinois, Ohio, Indiana and Iowa — representing 45 percent of forecast U.S. corn output and 41 percent of soybeans — showed bigger yields than last year, according to inspections on the 22nd annual Pro Farmer crop tour, which ended yesterday. Corn production will be 14.093 billion bushels, compared with 14.032 billion estimated by U.S. Department of Agriculture, Pro Farmer said in its final report today. Soybean output was forecast at 3.812 billion bushels, compared with a USDA estimate of 3.816 billion.
The volunteer scouts on the four-day crop tour drove more than 15,000 miles across seven Midwest states, the biggest growing region, taking random samples by counting the number of kernels on corn ears and pods on soybean plants. Editors of the Pro Farmer newsletter will issue final estimates of U.S. output today, partly based on this week’s measurements.
In Illinois, the No. 2 corn-growing state, Pro Farmer estimated yields at 198 bushels an acre, more than the 188 bushels the USDA predicted earlier this month, while soybeans were estimated at 54 bushels an acre, the same as the government forecast. In Iowa, the top grower, Pro Farmer pegged corn yields at 183 bushels, less than the USDA’s estimate of 185, and said soybean yields will be 49.5 bushels an acre and may reach the USDA’s forecast of 50 bushels.
The outlook has improved after months of ideal weather. Through Aug. 16, the majority of the Midwest was slightly dry to abnormally moist, according to a weekly Crop Moisture Index from the National Oceanic and Atmospheric Administration. Temperatures that have been cooler than normal will remain average or below average through the end of August, the agency forecasts.
The government already predicted record crops on Aug. 12 and a drop in exports that will boost reserves, with corn output rising 0.8 percent and soybean production gaining 16 percent. The USDA will update its forecasts on Sept. 11.
Prices have plunged to the lowest since 2010, with soybean futures in Chicago dropping to $10.35 on Aug. 20 and corn slipping to $3.58 on Aug. 12. Money managers have cut their bets on a corn rally by 75 percent since early April, and they have had a net-short holding in soybeans for five straight weeks, U.S. Commodity Futures Trading Commission data show.
Surging crop supplies may exacerbate the squeeze on grain storage and shipping. BNSF Railway Co., owned by Warren Buffett’s Berkshire Hathaway Inc. (BRK/B), and Canadian Pacific Railway Ltd. struggled with “greater-than normal” demand from shippers of coal, oil and Midwest crops, the USDA said this month in a report.
Combined with inventories left from the 2013 harvest, production of all grains and oilseeds will boost 2014 supply to 26.97 billion bushels, USDA data show. That’s more than the 23.4 billion of storage on farms and grain-company silos as of Dec. 1, the government estimated in a Jan. 10 report.
“I don’t know where it will all go this year,” said Richard Guse, a 54-year-old farmer from Waseca, Minnesota, who owns a 1 million-bushel grain elevator that he expanded in the past year by 275,000 bushels. “We need better roads and faster train shipping to keep the grain moving,” Guse said this week while inspecting fields as part of the Pro Farmer crop tour.
With the main harvest still weeks away, there is still time for crops to be damaged by weather, including an early frost. Parts of eastern and northwestern Iowa, the largest corn-growing areas, had less rain than normal over the past two weeks, QT Weather said in a report yesterday.
Not everyone is seeing better yields. Parts of Nebraska, Iowa and South Dakota had samplings that were less than last year. Ron Lampe’s 2,100 acres in Cumminstown, Iowa, were flooded by 20 inches of rain in late June, forcing him to replant more than 10 percent of his corn fields and damaging some of those that survived.
Prices already may reflect expectations for a national corn yield of 170 bushels an acre, which would be more than the 167.4 bushels estimated by the USDA earlier this month, said Christopher Narayanan, an analyst at Societe Generale SA in New York who participated in the crop tour.
“I haven’t seen anything or heard anything that might suggest it would be higher,” Narayanan said in an interview yesterday.
For now, there are few risks seen and many farmers are expecting bigger harvests.
More rain is expected through the weekend across the northwestern and eastern Midwest, increasing soil moisture to boost the final stages of soybean growth, Donald Keeney, a meteorologist at MDA Weather Services in Gaithersburg, Maryland, said in an Aug. 20 report. There are no risks yet of frost, Commodity Weather Group said. The weather service yesterday predicted national corn yields will reach 171.5 bushels an acre, 1 percent above a prior estimate.
Best Crop Ever
Wentworth, the Illinois grower, said that instead of adding extra grain bins he is relying on forward-contracting to sell his anticipated avalanche of grain to six grain companies including Cargill Inc. and Andersons Inc. (ANDE) It will take about 538 semi-truck loads, each capable of hauling 80,000 pounds of corn and soybeans, to get his anticipated harvest to buyers. He’s been working to lease trucks and hire temporary drivers to help his two part-time employees keep his grain moving.
Cory Ritter, who farms about 2,000 acres with his father near Blue Mound, Illinois, said they planted more corn this year and expects to harvest 250 bushels an acre, at least 15 percent more than he originally anticipated. Some fields may get as much as 280 bushels, with some plants sprouting second ears and kernels heavier and larger than last year, he said.
“My corn has not been under any weather stress for one day,” said Ritter, 33. “The seed popped out of the ground in four days and started growing right away. Cool temperatures helped during pollination, producing big ears, and rains have come at the perfect time all season. It’s my best crop ever.”