Planting delays in the US Corn Belt during the spring and a wet harvest has produced a surplus of low-quality corn that is forcing dealers on the export market to blend supplies to meet the standards of overseas buyers, traders and analysts said.
"I think the big thing is you are going to try and blend it off with good quality corn," said Don Roose, analyst with US Commodities in West Des Moines, Iowa. "The exporter does not want the poor quality corn. You are going to try and blend the quality up." The high-moisture content of much of the crop has led to some additional movement of corn to elevators. Much of this corn would typically be stored in piles on the ground throughout the winter.
But farmers fear that quality conditions will deteriorate even further if the corn is left on the ground this winter so they have been accepting steep discounts for the wet crops. "Most of the people have their storage filled up and did not want to put poor quality corn on the ground. You are inviting trouble there," a dealer on the export market said.
Corn prices have fallen during the past week amid concerns about the quality. Cash dealers have been lowering their basis bids for corn even as the futures market has weakened, dropping nearly 5 percent in the past week. "This is a very poor crop in the northern Corn Belt to try and store," Roose said. "The basis levels are under pressure because the producer continues to move stuff. While there is an incentive to hold corn, people are more afraid of the quality."
Agronomists throughout the Midwest have noted high levels of fungal diseases, including Diplodia ear rot, which damages kernels and complicates grain storage. Additionally, much of the crop came in with moisture levels above 20 percent compared with the standard of 15.5 percent. Demand for US corn on the export market remains light even as harvest delays have limited the amount of supplies available on the market.
The US Agriculture Department said on Monday that 88 percent of the crop was harvested as of December 6, a time when harvest is typically finished. [US/COR] Snowy weather around the Midwest this week has prevented farmers from finishing their harvest tasks. Analysts predicted that a USDA report Thursday morning will peg 2009/10 ending stocks of US corn at 1.65 billion bushels, a 40 million-bushel increase from the forecast issued in November.