Cashing in on early harvest action
A couple weeks back, the corn crop was woefully behind its normal development pace in parts of the Corn Belt. Then, Mother Nature came along, turned up the oven, and triple-digit temperatures helped the crop move quicker in its development. They've been far from the best conditions for crop development in late August and early September, but growing degree units caught up to a near-normal pace in some spots, at least.
Now, at the midpoint of September, corn harvest is in full swing in some parts of the Midwest. It's earlier than normal for some, but the way crop conditions are shaping up -- with a lot of potential for downed stalks and ears if the malnourished, thirsty crop is left in the field too long -- many farmers are starting to roll. And, healthy cash-basis levels don't hurt for farmers who are looking to capture every dollar they can from another year of subpar corn yields.
On Thursday, farmers delivered 166,000 bushels of wet corn to the Cargill facility in Eddyville, Iowa. Ray Jenkins, the company's senior grain merchandiser there, hasn't been surprised. Between the cash-basis incentive and the discount the company is offering for drying the wetter, oftentimes lower quality grain, it's meant the early harvest pace has moved right along.
"If you have new-crop corn that can be harvested, these are very strong basis levels for a year when we have a good crop . . . at 35 cents over the December contract, that is the same as almost 10 over next July futures, and you get your money now or right after the year, if you defer. So it makes sense to move the cash corn and own futures or write a basis contract," he says.
And, it's not just in south-central Iowa where this type of opportunity is arising for farmers. It's typical for ethanol plants and other processors to be offering such cash incentives for farmers getting into the field now, especially in a year when more widespread harvest action might reveal even more disappointing yields.
"By harvesting some of their corn early and delivering directly in to local corn users, such as processors, livestock feeders, and ethanol plants, farmers could potentially earn a premium of 50 cents per bushel or more over cash prices offered in October. That premium price is likely to disappear quickly in early October, when the 2013 fall harvest begins to pick up more momentum," says Iowa State University Extension farm management specialist Steve Johnson. "It’s really going to be a win-win situation for grain users and farmers. Corn users are looking for corn now after last year’s short crop, and farmers could use this to earn premium prices and help their fall cash flow situation."
Jenkins says he suspects there's still more grain around the countryside than some think. Taking that into account, even if disappointing yields are on the horizon soon, farmers should include it as a marketing consideration moving through this fall, Johnson adds.