Barring an unexpected negative weather event, on-farm corn storage for you and your neighbors will fill up quickly this fall. Understandably, that sounds scary from a marketing perspective, says Matt Roberts, associate professor of ag economics, The Ohio State University.
"If we keep going the direction we’re going, we’re going to be swimming in corn this fall," Roberts tells AgriTalk radio host Mike Adams from the Wyffels Corn Strategies 2014 event. "That means we’re going to see a lot of storage pressure. We’re going to see dump charges. We’re going to see real weak basis off the combine, and that means bins are going to be full. People are going to see taking it to the elevator as a last resort off the combine, that’s only going to be what’s done if they have no other good options. We will see piles, and that of course is going to drive basis weaker."
And it turns out big harvests generally follow the crop storyline that has played out so far this year. Over the past couple of decades, cooler conditions in the northern Corn Belt along with some soggy fields and a bit of a late start have combined to produce big yields.
Historically, this is the kind of weather we tend to see," Roberts explains. "We see great Julys, a little bit cool in Iowa, in Illinois, in Indiana, and those overwhelm any shortfalls that you might see out of Minnesota or the Dakotas. I think that’s the way we’ve set up."
That makes marketing a tough prospect. Roberts thinks hedge-to-arrive (HTA) contracts will be "superior to any other marketing product simply because we’re going to have big carries because we have a big harvest and I think we’re going to have weak basis at harvest."
In soybeans, the market won’t know for a while what production levels look like, despite record acreage planted. Instead, analysts are focused on the amount of extra crop China could feasibly pick up.
"If we’re sitting here and talking about the size of harvest that we are, is that going to happen again?" he says. "That’s a hard thing to rely on."
Click the play button below to hear Roberts’ complete interview with AgriTalk: