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Corn+Soybean Digest

Hold everything! Low corn prices favoring storage

Stockpiling rather than selling appears to be the growing trend for grain producers looking to get the best deal from their corn crop.

Matt Roberts, an Ohio State University Extension agricultural economist, says that several factors, including the weather, transportation problems and a record harvest, are driving producers to store more grain.

"It's very profitable to store simply because there is a great demand for storage," Roberts says. "For producers who have on-farm storage, the more storage you do have, the better."

Impacts from Hurricane Katrina, transportation disruptions and the second largest corn harvest on record are contributing to the attitude of storing now and selling later.

"We are still seeing some of the after-effects of the disruption on the Mississippi River from Katrina," Roberts says. "One issue is the disruption of barges and the continuing shrinkage of the fleet. We've had very little barge building since the 1970s. Barges are nearing the end of their useful life.

"Also, we continue to have rail transportation issues. Just having enough cars and having them in the right places is a problem. To top it all off, we have a 10.8 billion bushel harvest of corn this year. That's a huge number of bushels to move through marketing channels and any inefficiency, any delays are going to really back up that whole marketing chain."

Such factors are dropping the price of corn -- currently from $1.50 to $1.60/bu. -- below the cost of production.

"Corn prices may continue to fall a little from here, but I don't think we are too terribly far from the bottom," Roberts says. "At any rate, producers are not going to get excited at selling at these prices. I believe we'll see sales slow as soon as harvest passes and rebound in the spring.”

Despite the issues surrounding corn production, attention should be paid to the soybean crop, Roberts says.

"I'm more worried about soybean prices falling than I am about corn," he says. "Soybean cash prices are currently about $5.40, but I believe there is a real possibility the prices will fall, and we won't see the low until about March or April."

High prices of nitrogen fertilizer might force producers to switch from corn to soybean production in 2006. Analysts are predicting a 1.5-3 million acre switch from corn to soybeans next year. The result likely would weaken 2006 soybean prices.

Roberts also believes that current soybean prices are being based on the probability of a short South American soybean crop -- a prediction that he believes is too early to make.

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