Wanted: High-quality new-crop corn
With a shortage of high quality corn, U.S. grain buyers have pulled out all of the stops to attract freshly harvested crops.
For months, the industry has been focused on the issue of blending last year’s poor quality corn with this year’s new crop.
With reports of grain barges stacked up all along the Mississippi River and Gulf of Mexico ports loaded with No. 3 grade or below quality corn, companies are rushing to offer farmers incentives to bring in high quality corn.
"They paying some amount to just sit there. They know the only way out of this is to get higher quality corn down there so they can blend it with the lower quality corn," says Eddyville, Iowa-based Cargill Senior Grain Merchandiser Ray Jenkins.
Dale Plumer, JBS United grain merchandiser, says early harvest discounts are used to get farmers to get new-crop started.
“The damage of the old-crop coming in is twice as bad as a year ago. We need this year’s crop to be good quality. So far, what we’re seeing is good stuff.”
To entice farmers to deliver new-crop, higher-quality corn to terminals -- rail or river -- to get it in position to blend with the '09 crop (some of which is up to 65% damaged, Jenkins says), basis levels are being trimmed. "It's to get somebody to harvest that corn and say 'hey, I can see by their bid they'll be 40 cents under in October, but 10 under today. I can harvest this stuff now,'" Jenkins says.
Between the shuffling of nearby corn contract months on Friday and the movement in the futures market, Jenkins adds the corn basis at Eddyville was up to 12 cents under the nearby contract, reflecting the already-building pressure to get farmers to deliver new-crop corn.
Plumer's west-central Illinois elevator is also bidding up for freshly harvested corn as early as possible.
“This early in the harvest, the cash bid is normally higher than in the fall, because we are encouraging farmers to go get some fresh corn. But, yes, this year we are offering more incentives.”
In addition to paying a premium for new-crop corn, some grain buyers are offering free delayed pricing vs. a regular 50-60¢ per bushel charge, and cutting drying charges in half.
“To encourage farmers to start rolling, we are offering discounted drying charges. We are cutting that cost in half. We have farmers that will start harvesting at 25% moisture. So, that drying discount can be quite significant,” Plumer says.
Plumer adds, “We had a good response with this discounted drying rate last year and I think we will see the same this year. Next week, we will really see the combines rolling more.”
In Greene County, Illinois, one elevator operator requesting to remain anonymous, is discouraged about the new-crop corn quality. “The early crop seems to contain diseases, mainly ear rotting. The later stuff will get better. We need it! At every river grain house, all along the Mississippi and Illinois rivers, there is damaged corn from last year,” he says.