Grain Storage Shortage Expands; Lessons Learned for 2017
As Ray Jenkins crisscrossed the Iowa countryside this fall, he saw piles upon piles of grain stored outside. From grain bags on farms in Ottumwa to corn piles dumped on the ground in Prairie City, “there is more grain being stored outside this year than there has been for 15 or 20 years,” says the now retired grain merchandiser.
This doesn’t come as a surprise, given the large size of this year’s corn and soybean crops. What is surprising is that there were relatively few bottlenecks caused by storage or transportation issues during harvest. To understand why there weren’t bottlenecks and also where there could be problems in the future, you need to see the bigger picture of this year’s storage shortage as well as what went right during the 2016 harvest.
Grain Storage Shortage
On September 1, 2013, at the start of the 2013/14 marketing year, ending stocks were much lower than normal because of reduced yields during the 2012 drought. In the four years since the drought, the size of the soybean and corn crops has grown bigger and bigger.
To put this into perspective, the USDA’s WASDE report released at the start of the 2013/14 marketing year put the U.S. corn stocks at 1.855 billion bushels and soybeans at 150 million bushels. In this year’s most recent report, the USDA pegged corn stocks at 2.403 billion bushels and soybeans at 480 million bushels.
In 2012, the U.S. produced 10.725 billion bushels of corn and 2.971 billion bushels of soybeans. For 2016, the USDA is projecting the corn crop to be 15.226 billion bushels and soybeans to come in at 4.361 billion.
“We are carrying more corn into the new crop year, and our crop sizes have been increasing as well,” explains Jenkins. “With the combination of these two things, we end up with a pretty big bulge in the fall months.”
This has led to a grain storage shortage in many Midwest states this year. Kansas tops that list with an estimated shortage of 320 million bushels, according to the USDA. Last year, Kansas’s shortage was less than 50 million bushels.
While Kansas’s total production is lower than large corn producing states, like Iowa and Illinois, it has the largest shortage because more farmers are making the switch from wheat to corn.
“Farmers are taking out crops that might yield 40 to 60 bushels in a good year and replacing those acres with corn where the yield could be 100 to 200 bushels,” says Jenkins. “All of a sudden, you start pushing the corn production, and you manufacture a space shortage because corn has higher volumes.”
In addition, farmers have become more reluctant sellers as prices get lower. “In most years, Kansas has been a net deficit corn area because they use all of their available supply. This year, there was a lot more corn carried over in the state,” adds Jenkins. “To top it off, Kansas also grew a monster wheat crop.”
Other states with a storage shortage this year larger than 150 million bushels include Nebraska, Illinois, Iowa, and Missouri.
The Right Harvest Conditions
Despite this year’s massive harvest and the shortage in permanent storage, for the most part “the system handled this year’s crop better than anticipated,” says Jenkins.
There were multiple factors that came into play for this to happen.
First of all, the size of this year’s corn crop really didn’t sneak up on people, says Jenkins. “Everybody knew it was a lot of volume to work with, and that they were going to need to put it away.”
To deal with the large crop, farmers, grain elevators, and co-ops were ready with temporary or emergency storage space. “I know one farm operation in central Iowa that has over 600,000 bushels stored in grain bags,” says Jenkins. “A co-op in the same area had filled their temporary grain storage space – an outdoor bunker with ventilation and a tarp – and then dumped excess grain on the ground next to it.”
In addition, this year’s corn crop didn’t need to spend as much time being dried, eliminating a common harvest bottleneck – the dryer. “The crop dried down in the field nicely, and that made it easier to handle big volumes,” says Jenkins.
Mother Nature also cooperated for harvest, giving farmers the ability to spread out the workload.
“The other thing that’s been a blessing is that the export demand for corn and soybeans was extremely strong all fall,” adds Jenkins. “This helped free up space to handle huge crops.”
In the past three weeks, soybean exports have totaled 274 million bushels, equal to Missouri’s soybean production. For this marketing year, soybean exports have totaled 803 million bushels, which is the total production for both Iowa and South Dakota.
Last, railroads were better equipped to handle the additional capacity. Since the 2014 harvest, where large crops and shipments of crude-oil caused traffic jams, railroad operators have spent billions, investing in new railcars, double tracking, and high-speed grain loaders.
A Slow Recovery for Corn Basis
While many things went right during harvest, there are some downsides.
“The biggest effect on farmers is going to be the fact that with more grain than ever stored temporarily, which will need to come back into marketing channels quickly, this could keep the corn basis from recovering as quickly as we would normally see postharvest,” says Jenkins.
In mid-November, the basis typically improves between 15¢ to 25¢. “I think the recovery may be half of that this year,” he says. “Then it’s a matter of how much grain is stored outside and how long it takes to get it cleaned up.”
Through the first three to four months of the winter, Jenkins expects the corn basis to remain 5¢ to 10¢ wider than normal.
Prepare for 2017
If one or more of this year’s harvest conditions had changed, would you have been able to handle this year’s crop? For example, could your dryer have handled additional capacity if moisture levels were 4 to 5 points higher? If your closest elevators stopped taking grain, do you have enough semis to haul grain to another location and keep harvest going? Or do you have permanent or temporary storage in place at your farm to handle the overflow?
“We are going to be growing this size and bigger corn and soybean crops in the future,” says Jenkins. “If you struggled to manage this year’s crop, you should think about what you want to do next year to handle another big crop.”