Strong harvest, low prices create storage problems for farmers

(MCT) - This has been a challenging fall for farmers.

First, forecasts of a record harvest forced grain prices to their lowest levels in years. Then, late season rains slowed efforts to bring in crops. And now, growers need to store a lot of corn and soybeans.

A complicated dance involving current and future grain prices has many farmers scrambling to come up with extra storage space after filling their own silos to the brim. They're doing everything they can to avoid selling at rates that don't even cover production costs- a bushel of corn, for example, is fetching prices in the $3 range after topping $8 in 2012.

"When harvest hits, the prices really tanked," said Jay Schutte, who farms near Mexico, Mo. "Basically, the market is telling us to store the grain."

Easier said than done.

Schutte is in good shape, with capacity to hold some 250,000 bushels in his own bins.

But others will be cramming corn and soybeans into unused buildings, giant plastic bags and even piling it on the ground in the coming weeks.

It's what happens when an ideal growing season gives farmers what they don't necessarily want.

This year's corn harvest is expected to yield 14.5 billion bushels, or 174.2 bushels per acre- a 4 percent increase over last year and the highest production on record, according to recent forecasts by the U.S. Department of Agriculture. It's the same story with the soybean harvest, which is expected to yield 3.93 billion bushels, or 47.1 bushels per acre- 17 percent better than last year.

Such a strong crop puts considerable pressure on the nation's storage capacity, which stands around 23 billion bushels divided between on-farm and off-farm grain bins, according to the USDA. It's a situation further complicated by the fact that available storage isn't always located in regions with the strongest harvests.

So even if a farmer clears up his inventory by selling surplus corn, it just adds to the general congestion, said Darrel Good, an agriculture economist with the University of Illinois at Urbana-Champaign.

"It doesn't matter who owns it, it has to have a home somewhere," Good said.

Ironically, one of the factors working in farmers' favor right now is the slow pace of this year's harvest.

Farmers in Missouri and Illinois appear to be running two or three weeks behind schedule, compared with the pace set over the past five years, according to the USDA. That matters because the nation consumes some 70 million bushels of corn, soybeans and wheat every day, Good said.

"That continuously frees up storage space for the newly harvested crop," he said.

And while that's not enough to make the storage problems go away, things could have been worse, he said.

The challenge for many farmers is simply finding a place to store some grain for five or six months- long enough for anticipated price increases to offer an extra 50 cents or more per bushel.

"For a lot of guys, that's the difference between making a little money and breaking even or even losing money," said farmer Austin Meyer.

For several years, Meyer has been running a side business bagging up silage for other farms. This year, he added a grain bagger.

Basically, he has a machine that shoves corn, soybeans or wheat into giant plastic bags.

The bags have a diameter of 9 feet and are as long as a football field, holding up to 12,000 bushels.

The bags are sturdy enough to last 18 months or longer under the right conditions. And with a cost of 18 to 25 cents per bushel, Meyer proclaims it a nice option that bridges the storage gap during exceptionally strong harvests.

It's certainly cheaper than paying for a new grain silo, he said, noting that even a smaller bin holding 12,000 bushels could cost $30,000 to build.

"It takes 20-30 years to pay for a grain bin," Meyer said. "It's a long-term investment."

But for some farmers, even finding access to temporary storage will do little to solve the problems created by this year's harvest. When prices fall below $4 a bushel for corn, farmers- particularly those who don't own their land- have trouble turning a profit on their crops, once a range of production costs are factored in.

And some of those farmers don't have the luxury of waiting for prices to come back up. Not when there are bank loans that need to be paid, said Jim Stuever, president of the Missouri Corn Growers Association.

"Their notes are written just like someone with a car payment or anything else," Stuever said. "They have due dates on them. That will force you to deliver."