U.S. Corn Harvest Competes With Oil Transport

Posted by Joseph Keefe October 6, 2014

The giant corn harvest about to hit full stride in America's Midwest looks set to overwhelm storage and pile up outdoors, grain industry sources said, raising quality issues and making it hard to keep supplies moving.

This year's record corn crop of 14.4 billion bushels alone would fill up 60 percent of the country's grain storage of 24 billion bushels.

In total, with a record soybean crop too and hefty harvests of other grains including spring wheat, there will be about 20 billion bushels of new crops looking for storage. That would be on top of the 3.5 billion bushels reported in storage as of Sept. 1 by the U.S. Department of Agriculture (USDA).

Hal Reed, chief executive officer of the Andersons Inc , a major grain handler in Toledo, Ohio, said his company is already piling grain at its elevators in Tennessee and other mid-South states even before harvest moves north into the main Corn Belt.

"We still believe the actual yields will continue to grow from where USDA has them at now. The corn crop is as good as any I've ever seen," Reed said.

Surplus corn is often held in temporary piles of 200,000 bushels or more covered with tarpaulin waiting for trains or barges to ship the grain out, but this year transportation has been hard to find as shale oil competes for space on rails.

"There are going to be piles and piles. The stampede will start about Oct. 20," when on-farm storage in Iowa should be about full, said Charles Hurburgh, a grain quality specialist at Iowa State University.

The challenge will be to preserve the quality of the crop left on the ground and keep it safe for later use by food processors, ethanol and starch makers, livestock feeders and exporters.

Grain merchandisers need to make sure corn is dried to about 13 percent moisture before storing. It also needs to be properly aerated during the months it is on the ground to prevent spoilage and stop toxins from growing.

Soybeans, valued for their oil content and harvested before corn, are more likely to be sold straight off the field than corn, which is hardier and can be "air dried" to save farmers money from having to pay to dry the grain.

"As much as people say you can put corn away at 17-18 moisture, put the aerators on and keep it - experience tells that doesn't always work out well," said Joe Christopher, a Nebraska merchandiser.

Grain merchants are expected to force many farmers to accept "deferred pricing," or DP, contracts, which allow merchants to take ownership of the grain, allowing them to move it to manage their space.

But there are still problems moving the piles with rail freight rates soaring because of competition not just among grain shippers but also from shale oil in many grain regions, especially the Dakotas.

"It gets clogged up at the farmer, it gets clogged up at the elevator, it gets clogged up at a whole bunch of places. It's going to be a real problem," said Stephen Nicholson, an analyst at Rabobank, a major farm lender.