Agricultural economists are advising corn growers to store their fall harvest this year, telling farmers they can reap higher prices for their crop if it’s held off the market to satisfy post-harvest demand from the state’s booming ethanol industry.
Trouble is, finding a place to store the corn – and a way to pay for storage – might be more trouble and expense than the future higher prices can offset.
In an early September customer advisory, Ag Management Services market consultant Rich Balvanz said what the industry calls “carries” – higher prices paid for deferred delivery of stored crops – may prove too attractive for corn producers to ignore. But the demand for storage is likely to drive up its cost.
“There has never been a year in recent history when the farmer has been paid so much for storing a crop,” Balvanz wrote on Agriculture Online.
Ralph Ebert, manager for the Bartlett Grain Co. elevator in Yuma, said their silos are nearly empty and there is no commercial storage shortage in Northern Colorado.
“It’s business as usual,” Ebert said. “There’s plenty of commercial storage but some farmers may have private storage problems. They need more storage but they’re short of capital.”
The premium prices would be a boon for Weld County corn growers suffering through tight economic times. While Weld is the third largest corn-producing county in the state, the drought reduced the county’s 2005 output by 7 percent from 2004. Total crop for 2005 was 9.6 million bushels.
Cody Kalous, inventory control specialist for M&M Cooperative Inc., agreed storage is readily available in Colorado and said the company’s new Yuma plant, set to open April 2007, will store an additional 1.8 million bushels.
The new plant offers producers an advantage, with a 110-car capacity loop of railroad track linking the elevator to the $61 million Yuma Sterling Ethanol LLC ethanol plant, set to open March 2007.
Farmers are taking a closer look at rotating other crops with corn for 2007, considering the post-harvest demand for corn to produce ethanol, stable exports and processing and domestic feeding.
The ethanol industry in Northern Colorado will create an even higher demand for corn in 2007.
Sterling Ethanol LLC went online with a $54 million plant in that city November 2005. Front Range Energy opened a $54 million plant this spring in Windsor.
Three other projects in the planning and permitting stage include plants for Great Western in Evans and Sun Energy in Walsh.
A 40-million-gallon per year ethanol plant can increase area corn value by as much as 5 cents per bushel, according to 2005 USDA figures.
But if market premiums are too high, Dalsted said plants would likely change their ethanol ingredient.
Although ethanol can be produced using virtually any biological feedstock – from sugar cane to wine grapes – corn has been preferred because of its comparatively low cost and high starch content.
Jack Fenwick, an associate professor of soil and crop sciences at Colorado State University, said Colorado’s status as a corn-deficient state, requiring corn to be shipped in to fulfill state needs, may explain the availability of commercial storage.
While experts advise farmers to hold out for higher cash prices, a quick recovery already may have begun.
The price per bushel dropped by 20 percent in early September, but corn futures have turned, rising as much as 20 cents on the futures market in a single three-day period in late September. The current price projections of $2.70 to $2.80 per bushel for corn could make lengthy storage irresistible.
CSU agriculture economist Norm Dalsted said cash market premiums already are being offered in some markets for corn carried as little as 90 days.
Dalsted recommended growers look carefully at their cash flow before deciding when to sell. “If the farmer has debt to service, likely there is a marketing plan in place, which may or may not include storing corn.”
The increasing debt burden of Colorado agricultural producers may drive farmers to sell crops immediately.
USDA figures reveal Colorado growers owe 20 percent more debt than they can service with their current income. Producers also face production expenses that increased a record 5.8 percent for 2005, with another record anticipated for 2006.
Several options are available for producers unwilling or unable to absorb commercial storage fees.
Fenwick recommended the plastic covers available from commercial elevators as a relatively inexpensive option.
Low-cost grain harvest bags are gaining in popularity as they allow producers to maintain the maximum value of a crop without resorting to outside pile storage. The membrane-based storage units also allow growers to segregate grain into small, identifiable batches. Each sealed bag holds up to 300 tons of grain and will reduce fungi and insect activity.
Alternately, existing farm shelters and machine sheds can be adapted to serve as temporary storage units. CSU Cooperative Extension advised farmers considering adaptation to take into account structural strength, floor surface and the ability to handle and manage grain.
“Outside storage is really a chancy method of last resort,´ said M&M’s Kalous. “You can’t sell it to any outlets because the elements get to it. Maybe you can sell it into feed sources, to feed lots.”
Despite the many impediments, Fenwick said he anticipates more farmers turning to corn crops.
“The bottom line is that every farmer takes advantage of where they think the most profit can be made. Price-wise, growers have to decide on two issues. One is labor and the other is water and both are at a premium right now.”
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