US farmers are expected to harvest a record-shattering corn crop this fall and a good portion will likely end up in huge piles on the ground until it finds a home, grain industry sources said this week.
That could lead to higher storage costs and a backlog in logistics as US grain moves from the farm into export channels, domestic feedlots or ethanol plants.
The US Department of Agriculture has already projected the 2004 US corn crop to be a record-large 10.6 billion bushels, up from last year's record 10.1 billion.
But grain traders believe the crop could end up closer to 11 billion bushels due to ideal weather during July when the corn went through its critical pollination stage. USDA will update its estimate on Thursday, August 12.
The US soya crop is also seen at a record 2.9 billion bushels by USDA. Soyabeans are rarely stored on the ground as the pea-size commodity is more prone to damage than corn.
"I think we can hold a 10.4-10.5 billion (corn) crop pretty easily. Now, if the crop is as big as some say, there are places where corn will have to be put on the ground," said Greg Johnson, a grain merchandiser with The Andersons in Champaign, Illinois.
US farmers had on-farm storage of more than 11.3 billion bushels capacity in 2003, with another 8.5 billion available at off-farm sites, according to trade and government statistics.
But the avalanche of grain coming into storage within two to three months usually means transport snarls - whether railcars, trucks or barges - can be worse than normal.
The eastern Corn Belt is expected to face the biggest crunch for storage. Corn is maturing quickly in Indiana, Illinois and Ohio. There tends to be less on-farm storage in the eastern Midwest than in the west, merchants noted.
"Everything is going to be ready at the same time in the east. I think it will accelerate the corn harvest basically from the third week in September through the third week in October - normally that's stretched to the first week of November," said Chris Hurt, an agricultural economist with Purdue University in Lafayette, Indiana. "It could really flood the logistics of the grain industry."
By contrast, the western and northern Corn Belt were now seeing cooler temperatures that would slow crop maturity and likely help stretch out the harvest flow from fields.
But rail was difficult to source even last year with much smaller harvests, sometimes backing up wheat shipments in the northern Plains for months. Some rail lines have added cars in anticipation of big fall harvest but most merchandisers don't expect much of an improvement.
"We have the potential for some pretty tremendous crops and probably two of the three railroads are going to have difficulty keeping up," said Roger Krueger, grain marketing director with South Dakota Wheat Growers, a farmers co-op.
River transport bottlenecks were also expected, and Midwest barge rates have jumped in recent weeks as shippers scramble.
Extension specialists said farmers are already looking at alternative storage facilities, including unused bins and machine sheds. Meanwhile, country elevators remain hesitant about offering commercial storage rates before USDA's Thursday report. Storage costs could rise quickly as space gets tight.
Rates vary by county but on average Midwest elevators charge a flat rate of roughly 14-15 cents per bushel until January 1. After that, storage can run 2-3 cents per bu per month.
"Storage charges could easily be 5 cents to even as much as 10 cents per bushel higher than they were last year," Hurt said, referring to the flat rate until the first of the year.
During the early 1980s when US farmers and merchants carried more than 3 billion bushels in surplus stocks, corn storage rates were as high as 20 cents per bushel until the first of the year, industry sources said.
"If there's a county that has tremendous crops and very little storage, the rates may be a lot higher. It equals out. Eventually it will all find a home and get under cover," Johnson said.