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Corn piles ahead?

Mike Wilson, Senior Executive Editor

June 16, 2006

2 Min Read
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Corn is destined to be a crop in high demand, what with ethanol taking off like a rocket. Now China is also making some noise, and that could boost demand even more. Eventually we'll start to see more grain railed out to West Coast export terminals.

I say 'eventually' for a reason. The trade anticipates a big crop this fall - possibly the second largest on record after 2004. Forecasted yields are ratcheting higher, now set at 156 bu. per acre nationwide. It also appears farmers planted a million or so more acres than USDA thought they would back in March.

Anyone selling grain straight off the combine is going to be in trouble this fall.

Despite corn's upside potential, expect to see mountains of it piled on the ground at harvest. I asked Bryce Knorr, Senior Editor at Farm Futures, if China, which recently purchased several million bushels of U.S. corn, would put any kind of wrinkle in this scenario. The answer: not really.

"Whether China will buy in the fall is questionable," he says. "They will probably have good local supplies and they won't get heavily into the market until we start moving into winter."

With demand out of Asia looking pretty strong, that's probably going to boost freight rates. Forward freight rates to the Pacific are already high, indicating rail cars will be in tight supply. Part of that is fuel cost, part of it is the cars themselves.

"Last time I checked they were almost as high as they were during hurricane Katrina," says Knorr.

If we have a big crop it won't make a difference, because basis will be lousy. Rail cars - or a lack of them - may exacerbate the situation, but it's not going to be a key issue.

China, if it becomes a buyer again, has a big impact on grain flow in the U.S. Midwest, where 60% of export grain goes down the river. But in the short term don't expect a lot of grain to move to the west coast this fall.

Next week, I'll share with you my visit with a leading rail car leasing executive as he explains how China might impact rail freight rates, and how the railroads are becoming more efficient.

About the Author

Mike Wilson

Senior Executive Editor, Farm Progress

Mike Wilson is the senior executive editor for Farm Progress. He grew up on a grain and livestock farm in Ogle County, Ill., and earned a bachelor's degree in agricultural journalism from the University of Illinois. He was twice named Writer of the Year by the American Agricultural Editors’ Association and is a past president of the organization. He is also past president of the International Federation of Agricultural Journalists, a global association of communicators specializing in agriculture. He has covered agriculture in 35 countries.

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