Monday, December 16, 2013

Farmers Hoarding Corn

WSJ, via Big Picture Agriculture:
Faced with the lowest corn prices in more than three years, many U.S. farmers are stashing away their grain in a bet on a rebound.
The strategy is sending ripples through the corn belt—affecting everyone from grain buyers to storage-bin makers—and tempering the price declines in the $27 billion corn-futures market.
By hoarding freshly harvested supplies, farmers are forcing livestock producers, ethanol companies and food makers to pay a premium over futures in some areas to secure corn, helping to buoy prices during what is expected to be a record U.S. harvest, traders and analysts say. But they warn the move could backfire on farmers in coming months if rival producers—such as growers in South America—generate big crops or demand for corn falls.....
Mary Ann Kwiatkowski, an independent grain trader at the Chicago Board of Trade, says she is "a little less bearish" on corn futures because of the farmers' strategy. Because storing corn leads to higher cash prices, it will cause investors to be less willing to bet on declines in corn futures, she says.
"Farmers have had a lot of years of doing very well," says Craig Turner, a senior broker at Daniels Trading in Chicago, "and they can use the bins as a bank account and only sell when they need to. Having the storage has helped with the price not coming down as much as it would have. It helps stabilize the price."
But analysts say corn growers are taking a big risk, noting that favorable weather so far this season for rival farmers in Brazil and Argentina could lead to large crops in the new year, which could further expand global supplies and exert even more downward pressure on prices.
The corn stockpiles also act as an overhang on the market. Farmers eventually will have to sell their grain, Mr. Turner says, and when they do, the added supplies will weigh on prices.
The USDA estimated in November that U.S. corn production will total 13.989 billion bushels this year, easily surpassing 2009's crop, the largest so far. The massive harvest comes just a year after the worst U.S. drought in decades curtailed output and vaulted corn futures to a record-high closing price of $8.3125 a bushel.
I don't see this ending well, and this is one of the biggest reasons I'm pretty bearish about the next couple years' corn crops.  I just don't see anything to drive prices higher for a while.  Also from Big Picture Ag are a couple of farmland price stories.  The fact that a big pension fund is buying a huge parcel of farmland is a contrarian indicator in my opinion.  As for Iowa, I don't know what's going on there:

WTF?  Has anybody out there tried to make those numbers work with corn under $4?

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