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Got corn? You're golden

CHICAGO, Illinois ( sold out of the majority of old-crop corn, Midwest farmers face a dilemma of marketing portions of this year's crop that is being planted late with threatened production potential.

Though farmers in western Corn Belt states are nearing completion of corn planting, at least 7.0 million corn acres are estimated to be unplanted in states in the eastern Corn Belt and the Dakotas.

For farmers that are not finished planting, this scenario leaves them hesitant to sell a crop not yet in the ground, while others see the market potential if the U.S. doesn't reach USDA's expected 92.0 million corn acre estimate.

Heading into Memorial Day weekend, commercial users of corn are already having a very difficult time in sourcing July or August supplies, analysts say. Yet, more signals indicating farmers are either mostly sold-out of last year's corn, or are staying on the sidelines waiting for increased prices.

Old-crop vs. New-crop

David Hillard, Consolidated Grain and Barge Co. (CGB) grain merchandiser, says farmers seem to be waiting to sell any new-crop corn. In addition, truck traffic, for old-crop sales at the CGB facility near Princeton, Illinois, has been very light, Hillard says.

"A lot of these guys are waiting to see if their late-planted corn is going to come out of the ground before selling it. Plus, with tight stocks, many farmers are expecting the value of this corn to go much higher," Hillard says.

Some contracted grain is moving, but new sales have been awfully quiet, he says.

Because ethanol plants continue to buy supplies, farmers who sell into that market are seeing strong prices. "The domestic corn market is better right now than the export market. That is another reason why a facility like ours is seeing less traffic," Hillard says.

An Marketing Talk member using the handle “Nebrfarmer” says ethanol plants in his area are buying new-crop, but are well supplied with old-crop corn. "I have some $4 corn to deliver to them now, and was told by the plant's dispatcher not to feel too bad, as over half the corn coming in for this year is at or below $4, and probably three-fourths or more for the rest of the year is under $5."

Katy Greiner, president of Kat's Grain in Washington, Iowa, says some new-crop sales are happening, but old-crop sales are few and far between. Even with a positive cash corn basis, farmers are gripping tightly to old-crop corn. "Anybody that has old-crop corn is holding onto it. They may be selling it in small pieces. But, yes, they are waiting for better prices."

Meanwhile, the trade is eyeing the expected 15-year low corn stocks scenario that could be realized at the marketing year-end date of August, 30, 2011. The belief is that come July and August, there will be very little corn around for the end-user to purchase. Because of late plantings and floods, the U.S. South corn crop, the first to hit the new-crop market, will not be ready to be harvested.

Joe Bedore, FC Stone Inc.'s CME Group trading floor manager, says farmers are not selling old-crop and little new-crop corn, knowing the tight stocks scenario.

"The talk constantly is that anybody that has corn on-hand is golden, "Bedore says. So, September is considered old-crop in the marketing world, this year. This means that if you have corn, it's going to be worth a lot. Therefore, I think farmers that have old-crop corn on-hand are not selling it."

Another Marketing Talk member says he's willing to risk waiting for higher markets. "I am not selling now, waiting for $8 corn. A local ethanol plant is paying $7.78 cash, before today's market opens. I took someone's advice to wait for $8 corn or $4 corn, whichever comes first. Do you think I will hit $8 before $4?"

Some sales

The story is different for new-crop corn, Greiner says. "We have farmer-customers selling corn anywhere from $4.00 per bushel up. Yeah, those farmers that sold at $4.00 did so too early, but they did the same thing last year. The last time we hit that $6.75 per bushel price, to the farmer's pocket, we started to see heavier new-crop sales."

In southeast Iowa, an area that historically doesn't have a lot of old-crop sitting around because of multiple market, including livestock operations, nearby river terminals, ethanol plants, processors, and elevators, farmers have sold different levels of their new-crop. "In an attempt to take advantage of some recent rallies, we've seen farmers sell up to 90 bushels per acre worth of new-crop, while others have sold 30% of their production," Greiner says.

Farmers Wait for Planting Season End

Once the U.S. planting season, slowed by a wet spring, is finished, farmers are expected to resume selling new-crop corn, merchandisers say. "When Indiana and Ohio finally get planted, you could see some pickup in sales," Hillard says.

Greiner agrees that new-crop corn sales are dependent upon the last half of this rain-drenched planting season. "Farmers are aware of the global corn demand, the tight stocks, and the impact Ohio's dismal planting pace is having on the market. Plus, they may want to see how the pollination season goes before releasing new-crop corn. I don't think farmers will oversell like they did last year," Greiner says.

Dustin Johnson, EHedger broker, says some farmers are selling new-crop, depending upon the location of the farmer. "For areas that had timely planting, new-crop sales are happening. Obviously, the eastern Corn Belt farmers are too concerned about not having a very good crop this year. They are not selling. But, I'm seeing a lot of guys in Illinois pull the trigger. They have great basis and flat prices to sell into," Johnson says.


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