The 8-foot corn stalks on Bill Long’s farm in southern Illinois are so big, green and healthy that he wishes he’d sold more of it sooner.
Like many growers across the Midwest, Long expects a second straight record crop that will boost domestic stockpiles already at a four-year high. Output in the U.S. will jump 2.8 percent to 14.314 billion bushels, the most ever, researcher The Linn Group Inc. estimated in a July 1 report. Even after fewer acres were planted, the wettest June on record left fields in the best condition since 2003 and sent prices into a bear market two months before the harvest starts.
"There is a wall of grain coming at us," said Roy Huckabay, an executive vice president at Linn Group in Chicago, said in a telephone interview July 2.
Two years removed from a devastating drought that damaged crops and sent prices surging, farmers will see yields rise 4.1 percent to an all-time high of 165.3 bushels an acre, government data show. Rising grain output in the U.S., the world’s largest producer, is keeping global food prices in check while boosting profit for meat producers including Tyson Foods Inc. and makers of sweeteners and ethanol including Archer-Daniels-Midland Co.
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Futures have tumbled 20 percent since the end of April, slipping into a bear market on July 3 to $4.1525 on the Chicago Board of Trade, after touching $4.145, the lowest since Jan. 10. The Bloomberg Commodity Index of 22 raw materials dropped 2.6 percent over the same period, while the MSCI World Index of equities advanced 4.7 percent. The Bloomberg Treasury index gained 0.3 percent.
Corn’s slump may worsen once the harvest starts. In separate reports, Goldman Sachs Group Inc. said June 23 that prices will drop to $4 in six months, while Rabobank International said July 1 the grain will average $4.07 in the fourth quarter. Dan Basse, the president of AgResources Co. in Chicago, predicted a drop as low as $3.50.
As of June 29, 75 percent of the crop was in good or excellent condition, compared with 67 percent a year earlier and the highest at this stage of development since 2003, the U.S. Department of Agriculture said. After low temperatures delayed planting this year, the arrival of warm, wet weather accelerated plant development in June with about 5 percent already reproducing this week, up from 3 percent in 2013.
"Right now, it looks as good as it did last year when we had a record harvest," Long said by telephone from Franklin, Illinois, where he farms about 3,000 acres with his son. "We have moisture in the ground and mild temperatures for successful pollination. We are ahead of the game."
In Iowa, the top U.S. grower, fields show "phenomenal yield potential," said Todd Claussen, director of agronomy at Ames-based Farmers Cooperative Co., the largest member-owned grain elevator and farm-supply company in the state. Claussen, who travels 55,000 miles a year scouting fields, said farmers planted more seeds per acre than ever and predicted yields in Iowa may near the record of 182 bushels an acre in 2009.
Improved output per acre is more than making up for a 4.4 percent drop in harvested acreage forecast by the USDA. Improved output in the U.S. will help boost global inventories by 8 percent next year to 182.65 million metric tons, the highest in 15 years.
Global output of all grain is forecast to be 2.5 billion metric tons, 18.3 million more than predicted last month, the United Nation’s Food and Agriculture Organization said July 3. Global food prices fell in June for the third straight month.
With harvest still two months away, output may fall short of forecasts and rising demand may help keep prices from slipping further.
With reduced planting, the impact of heavy rains earlier this year may keep yields around 159 bushels an acre, below the USDA estimate, Bennett Meier, an analyst at Morgan Stanley in New York, said in a report.
Some fields in the Midwest received three times the normal rain in June, which was headed for the wettest on record since 1895, according to T-Storm Weather LLC in Chicago.
"Rains probably have taken the top end off yields, and with a smaller acreage, the crop may be less than a year ago," said Jerry Gidel, the chief feed grains analyst for Rice Dairy LLC. "Corn prices are cheaper than a year ago, and demand should be better than people expect. We could see the market bottom by the end of July."
Money managers have been cutting their corn holdings for the past seven weeks, and are the least bullish since February. As of June 24, net-long positions in futures and options fell to 115,176 contracts, down 58 percent since April 1, U.S. Commodity Futures Trading Commission data show.
With prices already down 17 percent from last year, Long said he will probably end up storing about 25 percent of his crop after the harvest for the first time in four years. He sold about half of his expected output already.
"I wish I had sold more," said Long, 58. "Farmers are going to stick the corn in the bin and sit on it after harvest."
Stockpiles in the U.S. on June 1 reached 3.854 billion bushels, up 39 percent from a year earlier and the most for this time of year since 2010, USDA data show. By Sept. 1, 2015, before the harvest, inventories will total 1.726 billion, 51 percent higher than a year earlier.
Topflight Grain Cooperative Inc., based in Bement, Illinois is adding 1.5 million bushels of storage capacity and will probably have to tap emergency bins, said Scott Docherty, the general manager. About a third of crops in the area are starting to pollinate, with farmers anticipating yields as high as 250 bushels an acre, compared with an average of about 180 last year, Docherty said.
As much as two-thirds of the U.S. corn crop will push through the critical pollination period by July 20, Bethesda, Maryland-based Commodity Weather Group said in a report to clients on July 1. There are no signs of sustained heat, and moisture will be generally adequate, aiding development for "better-than-average yields," the forecaster said.
"There will be a mountain of grain at harvest this year," AgResource’s Basse said by telephone July 2, after scouting corn from Memphis to Minneapolis in the last week of June. "There are some blemishes along river and creek bottoms and some hail and wind damage, but it’s the best crop I’ve seen since at least 1994."