Grain Space Might Run Tight, Talk With Elevators Now

September 18, 2018 08:31 AM
 
Year after year of record harvests, combined with less export and ethanol demand could mean elevators won’t have as much space for grain as in previous years. Isolated areas could even turn grain away.

Year after year of record harvests, combined with less export and ethanol demand could mean elevators won’t have as much space for grain as in previous years. Isolated areas could even turn grain away, leaving farmers with few options.

On Monday Reuters announced two Iowa ethanol plants will shut down, adding more pressure to those local elevators and farmers who now have fewer options for their grain.

“Obviously if you’re anticipating taking your grain to this facility, or your elevators anticipated that, it could leave you scrambling to find a home for your grain,” says Angie Setzer, vice president of grain for Citizen’s Elevator in Michigan. She says those in the shadow of the impacted Iowa locations won’t be the only ones feeling the squeeze of limited space, either.

Based on recent record crops and updated quarterly stock reports, Setzer anticipates parts of Illinois, Iowa, Minnesota, North Dakota, Nebraska and South Dakota could have space shortages.

“You don’t want to wait until the middle or even beginning of harvest to start figuring out where you’re going to put those last bushels,” she says. “There’s always a place to take something, but it’s whether or not you want to take the financial hit.”

Farmers in North Dakota are especially concerned about what they’re going to do with soybeans, Setzer adds. The western Corn Belt relies heavily on demand from the Pacific Northwest to take grain.

“It’s been coming for quite some time, there have been multiple years of soybean production growth and a limited amount of demand increase. A lot of folks have been collecting soybeans over the years,” she says. Basis has widened considerably for farmers in those areas and can serve as a warning to farmers who aren’t in a pinch for elevator space yet—plan ahead.

Overall soybean stocks are up 26% for the U.S. from June 2017, while corn is just up 1%. You might be able to predict if your area will be running short on space by looking at the most recent grain stocks report and taking yields into account. In addition, there will be obvious clues like growing grain piles.

Talk to your elevator now. “If there is a concern about your local space and the ability to ship at harvest time have that conversation sooner rather than later,” Setzer says. “Certain areas you will see stocks are facilitated, but not as comfortably as they have in the past.”

The speed at which grain comes out of fields will have a sizeable effect on basis, too, she adds. If it’s a harvest like 2016 where everything came out of fields in just a matter of weeks, basis will widen considerably, but if it takes months basis will be more supported.

“Be talking about your hedges or futures contracts, too,” Setzer advises. “Find out what basis looks like on those contracts as well.”

Plan ahead if you’re bringing in wet grain. If stalk lodging or other in-field issues means you’ll have to harvest grain when it’s higher moisture content, make sure you have a drying plan in place.

“In a lot of ways elevators would rather take in the wetter bushels as long as they’re running close to moisture of what other bushels are coming in,” Setzer says. “Most facilities want to try to take in a [financial] gain with that drying value. But they may only have so much room for wet corn.”

Don’t panic, storage shortages likely won’t be widespread. Talk with your elevators and grain outlets ahead of time to understand what challenges you might have with harvest.

“Understand the pressure you might feel is the same pressure everyone is feeling and passing on to the elevator staff—you’re not alone in your concerns,” Setzer reminds. “We’re all working together to achieve the same thing and we all need to have patience.”

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