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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.
Though Midwest cash corn bids are weak, southern farmers are enjoying firm basis levels.
Jack Bridgers, a Mississippi Delta crop consultant, says the demand for higher quality corn is keeping local prices supported.
“We have one area buyer that has been $0.14 over the Chicago Mercantile Exchange’s corn price.”
On the flip-side of higher local corn prices, an area chicken feedmill operation can buy corn from the Gulf of Mexico, have it shipped, and it’s still over $1.00 cheaper than buying locally. In that case, farmers and end-users are benefiting from the high demand for higher quality corn.”
Further north, Dave Mowers, a crop consultant with Raemow, Inc. in northern Illinois, says the subpar yields that are being reported, combined with the push for higher quality corn could help firm cash basis bids.
“I imagine reports of ‘nose-backed’ harvested ears and average yields will bring on hot cash bids,” Mowers says. “I’m seeing a lot of ‘firing’ conditions on corn stalks, loss of nitrogen, and more early maturing corn than ever before."
Doug Martin says yields on his farm will probably drag compared to last year. He says other farmers who have begun picking corn near his Mt. Pulaski, Illinois, farm say they're seeing slightly lower yields. But, between the incentives local elevators are offering farmers who deliver grain in the next few weeks, it will make this year's early harvest a welcome scenario after the last 2 years.
"A lot of elevators are full of last year's damaged corn. Just the other day, one of the elevators we're doing business with was offering half-price drying rates under 25% (moisture)," says Martin, who expects to begin harvest on Monday.
Cargill's Jenkins says elevators full of '09 corn could be a widespread thorn in a harvest that's otherwise expected to run fairly smoothly, at least at this point.
"Corn sitting in the water is 1 thing, the corn in piles at elevators is something else. One elevator manager told me he has 2 piles of 300,000 to 500,000 bushels at 35% to 65% damage," he says. "They'll be moving that corn into blending bins. People on the rail will be dealing with subpar '09 crop corn through the end of the year."
Mike McGinnis and Jeff Caldwell contributed to this report.