Huge harvest keeping prices down

We are finally creeping up on the end of harvest in the U.S., but some areas, including Ohio, have a way to go. As we have passed into the final stretch, we are still trying to get a handle around just how huge the harvest is.

December corn futures came perilously close to the contract low Monday as talk continues that even the current government estimates of the crop are low. The best news to be found suggests that the weather could hurt the last of the harvest, and that the last of the crop may not have the yield of the early runs.

Locally, every farmer I talk to is a little sheepish as he admits that the corn yields are phenomenal. I hear talk of yields as high as 275 dry bushels per acre.

Big farmers say all acres are as good as 215 bushels-per-acre average. This year is blowing our previous best year away.

Keeping prices low

The big yields continue to hold down prices. Corn has been bouncing along near the December contract low, and recently that low was threatened. Monday, Nov. 13, we traded as low as $3.41 1/2 before easing back up a little.

We are currently trading this Tuesday morning, Nov. 14, at $3.42, but the contract low is at $3.40 3/4. No surprise that corn movement is slow in the country.

What is going to town is not being priced, and there are reports that basis is improving in an attempt to get ownership. Elevators that sold early trains to make room are struggling to get ownership to fill them as farmers hold on to cheap corn.

It is interesting that what constitutes “cheap corn” is relative. For a long time in this country, the “must-sell” threshold was $3.50 futures. That was a miracle price only seen in a few desperate times.

Ethanol factor

Then we went through the ethanol years, when the growth of that industry bid up the number of acres and bid up the price of relatively scarce inputs.

As a result of sharply increasing acres and using more than a third of our crop to produce energy, we ran up the cost of production so that now we are trading corn futures near that magic $3.50 mark and we consider it cheap.

Since it takes $3.50 to $3.75 to break even, it is cheap! The U.S. Department of Agriculture gave us our Crop Progress numbers yesterday afternoon. By the time you read this, they will be obsolete, but take them for what they are worth.

The Ohio corn crop is now 71 percent harvested. That is up from 60 percent last week, but well behind the 83 percent of this time last year. The five-year average is 85 percent. We are lagging the U.S., which is now at 83 percent. That, too, is behind the 91 percent average.

Soybean harvest

The bean harvest is more on pace. We in our state are at 93 percent, up from 90 percent, with 96 last year and 95 the average.

In other words, we are just in tune with the U.S., which is at 93 percent, up from 90 last week.

Last year we were ahead of the five-year average of 95 percent, at 98 percent. As we have mentioned for several weeks, the soybean prices are a different story from the corn. Soybeans rallied over 80 cents, then lost 35 of that.

That still leaves us in a market that is tempting to sell, since the South American crop will start to dominate the prices. Right now Argentina is dry, but Brazil is getting needed rain.

Beans have taken a downturn recently. January soybeans are now just below $9.25.The low Monday was $9.73 3/4. The recent low came on Oct. 12 at $9.69 1/2, but at the start of harvest we were $9.47 1/2 on Sept. 12.

So, we are now closer to the low than the high, but with nothing to encourage us but the calendar.

Making money

I remember talking to Brian Kelly at Pennsylvania Grain one morning a few years ago. I sold him corn for over $8, then I told him how hard it must be to have to pay that for corn to make ethanol. He laughed.

“I have the easy job,” he said. “The guy next to me has to sell the distillers!”

Brian is not paying $8 today, and neither is anyone else. Still, I always remind the farmer that it is better to have a huge crop of cheap corn than a poor crop in a year of good prices because the crop is cheap.

Do the math, and the good yields always are better. And, there is hope of better prices.

For that part of the crop that is going to the commercial, I encourage our managed minimum price contract. Things have to get better, right?

Scripture says the farmer should plant with hope. This year he should also bin the crop with hope for better days ahead.