Farm Progress

Shippers and rails learned from the large crop of two years ago and moved grain out of the countryside efficiently this year by adding capacity and rail cars.

November 10, 2016

6 Min Read

Active rail and barge shipping programs are easing stress on storage capacities. Trains and barges in late October and early November moved vast amounts of grain from this year’s huge harvests, but the big crops still filled grain bins, forcing elevators to pile much of it outside.

While the huge harvest of more than 15 billion bushels of corn and 4 billion-plus bushels of soybeans overwhelmed storage, the shipping networks ran hard and efficiently to move supplies to export points, where ships waited to haul the grain to Asia, Latin America and Africa.

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 “It seems every year we are worried about it, but somehow the market always seems to take care of it,” says Max Fisher, the National Grain and Feed Administration’s director of economics and government relations, of the huge grain supply. “We got this good export demand, and it came at just the right time.”

While Fisher agrees there were many instances of grain being piled outside, he says farmers still were able to find space for crops. Maybe that meant trucking them a little farther down the road.

“It may not be in permanent storage; it may be in a temporary bunker. But there will be a home for it, and it may take a little bit longer drive to get to it,” Fisher says.

This year provided a particularly difficult test for the grain network, as plenty of grain from the 2015 harvest remained in bins. Also, in Kansas, which has seen an increase in corn production in recent years, much of that state’s huge wheat crop still filled bins when the corn was being harvested this fall.

“Record crops and large leftover supplies of 2015 crops are filling every nook and cranny of grain storage capacity,” says Bryce Knorr, Farm Futures senior grain industry analyst. “But the industry has plenty of experience dealing with large crops and had adequate time to prepare.”

The industry learned from the large harvest two years ago. Since then, shippers have added capacity — particularly the railroads. Railroads spent billions of dollars adding cars and locomotives to prevent a repeat of the slowdowns that occurred during the oil boom a few years ago.

“Overall, there is plenty of capacity in the system, especially on the rail system,” says Knorr. “Shippers added capacity just as oil prices collapsed. That cut movement out of the Bakken fields, so we are not hearing of any big troubles there.”

The surge in exports occurred at the right time. In early November, government data showed export shipments for their respective market years up 74% for corn from 2015, up 11% for soybeans and up nearly 29% for wheat.

Handling those exports increased barge and rail movement. In late October, grain barges going downstream to export points reached a 13-year high, according to USDA’s Grain Transportation Report. Through late October, year-to-date rail shipments of grain to export points were up 25% from a year earlier.

Corn, soybean markets drop after USDA hikes production

Corn and soybean prices moved lower at the Chicago Board of Trade after USDA on Wednesday raised its estimate for this year’s corn crop to nearly 15.23 billion bushels and increased soybeans to a larger-than-expected 4.36 billion bushels.

Traders, on average, expected a minor reduction in the corn crop and a smaller increase in the soybeans. Larger yields were posted for both crops, with corn at 175.3 bushels per acre (bpa) versus October’s 173.4 bpa and soybeans at 52.5 bpa, up from 51.4 bpa.

The production increases raised ending stocks, with corn now at 2.4 billion bushels, up from October’s 2.32 billion bushels, and soybeans at 480 million bushels, up from October’s 395 million bushels.

Shortly after the report, Chicago December corn futures were trading about 10 cents lower for the day, and January soybean futures were 15 cents lower.

Harvest, exports, elections

October was an exciting, if not odd, month for crop prices

Soybeans started October weakly, with prices in the mid-$9s as anecdotal reports of big yields came in from the fields. They moved above $10 as exports heated up, with China buying big amounts. Prices then came crashing back down at month’s end, when a new FBI investigation put Hillary Clinton’s election in doubt.

The presidential election has not directly impacted crops, but the sharp drop in the equity markets that followed news of the FBI investigation hit a number of markets, including the crops, as investors sought safer havens like gold.

Farmers used the brief October rallies to sell portions of their big corn harvest, but held on to soybeans.

“We have seen corn sales pick up a little bit; in soybeans the rally got them to pull back a little bit,” said an Illinois dealer.

Amid the heated election rhetoric, the harvests moved fast after a slow start. By the end of October, corn’s harvest was 75% done. Soybeans were at 87%.

Reports of big yields were common, with corn at 200 bpa or more and soybeans at 50 to 60 bpa. The crops were in good condition and lacked disease pressure, grain dealers said.

The big corn yields had farmers hauling corn to whomever would take it. Truckloads were brought to the river markets in eastern Iowa even though their cash bids were about 15 cents per bushel under those of local processors. However, despite their higher bids, the corn processors were full and operating half days.

Soybeans in Illinois and Iowa largely went to local processors, but the strong export program did have gulf bids firming late in October.

The large harvest and active exports increased demand for barges to ship downstream to export elevators. Grain dealers said the shipments were going well, as fluid river navigation had empty barges quickly moving upstream for reloading.

Late surge in harvest

The corn and soybean harvests got off to a slow start in 2016 due to wet fields, but the pace gained traction by late October as drier weather arrived. Harvest then was on par or ahead of the five-year averages.

Corn was 75% cut as of Oct. 30 to match the five-year average, while soybeans were at 87%, 2 points ahead of the average. Iowa that week had 5.1 days suitable for fieldwork; Illinois had 5.2 and Indiana, 5.3.

Illinois harvest was nearly complete at that point, with many producers switching to fall tillage.

In Indiana, corn harvest was at 76% versus the 69% average, and soybeans were at 83% versus the 81% average.

Indiana officials reported, “Throughout the state, farmers experienced less-than-desirable weather conditions. Much of the northern part of the state was cool and wet, while many southern portions were warm and dry.”

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