This Fall a Good One to Store Grain on the Farm?
This may be the year to keep as much of your newly harvested corn close to home.
Declining corn market prices make paying for commercial storage or selling straight out of the field far from ideal scenarios, making on-farm storage a more attractive option for capturing more value for the grain that's seeing its market value continue to slide into harvest this fall. Right now, it's the scenario that has the lowest opportunity cost heading into a fall when a huge crop is expected, says Purdue University ag economist Corinne Alexander.
"If you don't have storage on your farm, your next best choice might be to sell – even if you have to take less than you wanted," she says in a university report. "It's a complex equation, and there are no easy answers."
Despite the difficulty in making a clear-cut decision in general, you can factor that opportunity cost by calculating commercial storage cost and the amount of time you think you'll store that grain. Or, if you're looking at selling straight off the combine, a simple calculation of cash price and your projected bushels can uncover income in that scenario. Neither of these, Alexander says, will likely net the income of storing your corn on your farm . . . if you've got the room.
"With so much corn coming in at once, it will be difficult to find room for it all," she adds.
There is a silver lining to all of this, though. If grain is cheap and plentiful during and after harvest, there are market factors in place right now that could dictate more demand from sectors like ethanol and livestock.
"If corn is cheap, people will find a way to use it," Alexander says.
But, there's also opportunity cost to holding on to grain on your farm, adds Ray Jenkins, senior grain merchandiser for Cargill in Eddyville, Iowa. With such a huge crop expected -- as much as 30% to 35% larger than last year in southern Iowa, Jenkins suspects -- it may be tough to be able to make a forward-looking marketing decision at harvest. And, it may be even tougher to make those decisions quickly and efficiently moving through harvest and beyond.
"Since south Iowa has been dealing with mediocre crops 5 of last 6 years, and that means farmers down here have not added as much storage space as they have in the areas where yields were better...so now comes the mother of all corn crops in 2014 and it is going to be very challenging to handle this crop which is also going to have plenty of moisture in it as well," Jenkins says. "The problem with just dumping it someplace on your farm is that you are dependent on both board and basis recovering post-harvest. And this year has the potential for a lot of corn parked in temporary space and needing to get back onto the market."
The difficulty of getting grain stored on the farm to the marketplace could ultimately have more influence over local markets and basis levels paid in some of them, Jenkins adds. So, be ready to adjust any cash marketing you do with farm-stored grain accordingly.
"Basis will be slower to recover than normal. And, I'm not sure what kind of board recovery can happen in that environment as well," he says.