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Nation’s corn glut stalls market
October 07, 2016 Jerry Purvis   

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The 2016 corn harvest is still a few weeks away, but early indications show this year’s crop will be on par with last year’s crop across the Corn Belt.

Shain Shimic, manager of West Plains, LLC said commodity prices for corn aren’t that good, so producers will have to make the hard decision over the winter whether to plant corn again next spring.

“Something will plant next spring, but I’m not sure if it will be corn,” Shimic said. “Prices are still in the $2.80 to $2.90 range per bushel. It’s the surplus of corn that’s driving down the prices. It’s simply supply and demand.”

He said Nebraska carried over about 1.7 million bushels from the 2015 crop. In the next year, there could be a 2.2 billion bushel carryover. The state raises about 15 million bushels a year.

“I don’t see an end to this until we can get acres out of production,” Shimic said, “but for this year, we’re looking at another big crop.”

Flooding in some southern states earlier in the year pushed planting season back for 2016. Late planting caused a slight uptick in corn futures prices, but it didn’t have much effect on the overall price of corn, which remained flat.

Jon Calahan, grain merchandiser with Crossroads Coop, said some dryland corn is being harvested south of Sidney, but irrigated corn still needs to lose about half of its current 30 percent moisture content before harvesting can begin. Because of late planting, harvest is about two weeks behind normal.

“After looking at the acres we normally have and the yield checks I’ve done, I think this year’s crop will be a little less than last year. But last year was exceptional.”

Average yields for corn are in the 170 to 180 bushels per acre range. Last year, the same areas Calahan was testing were averaging about 200 bushels per acre. He said much of the loss was caused by hail damage during the growing season.

“Right now, prices are below the cost of production,” Calahan said. “That’s an issue that will be with us for the next couple of years with depressed prices. However, there will be opportunities through the marketing season above the cost of production. Farmers need to be ready to do something when those opportunities come up.”

He said the yields coming in from the main Corn Belt are still exceptional in many areas, despite flooding in some parts.

“We’re expecting another huge crop nationwide,” he said. “It’s going to take something to tilt the scale the other way before we get the prices back up. That could be a severe weather event in some part of the world.”

Other factors besides bumper crops that are working to keep the prices of corn depressed. China recently raised tariffs on our dried distillers grain, a byproduct of ethanol plants. China had historically been one of the country’s best customers for distillers grain. But with increased tariffs, the grain is out of the price range for local producers.

“We rely on exports to get rid of a lot of the distillers grain across the country,” Calahan said. “Now it goes back into local ag production, replacing everything from soybeans, corn and wheat that are usually fed to livestock. That’s another underlying factor that will keep prices depressed.”

He said many factors account for depressed corn prices. Until the nation can get through some of the surpluses or some corn acreage is taken out of production, there’s no quick fix.

“Farmers need to be aware of their breakeven point,” Calahan said. “When prices push above that point, for whatever reason, they need to be positioned to take advantage of it. They need to stay in close contact with both their grain merchandising staff and their bankers.”
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