Grain bins are filling up. Transportation may not keep up with farm production.
The good news is that American farmers will have a really good year in 2014. The bad news is that American farmers are producing record corn, wheat and soybean crops in 2014.
On September 17, the US Department of Agriculture (USDA) released the following facts on corn production:
(1) Corn production was forecast at a record 14.395 billion bushels in the Sept. 11 Crop Production report.
(2) Yields across the entire U.S. are now expected to average a record 171.7 bushels per acre. That's an increase of 4.3 bushels per acre from the August report.
Another major source and tracking of corn production data is the World Agricultural Supply and Demand Estimates (WASDE) report. Their estimate of the U.S. 2014 corn figure is two billion bushels compared with 1.18 billion bushels for the 2013 crop and 821 million bushels for the 2012 crop.
The August USDA report anticipates lower corn prices will bring in buyers, and it increased corn feed and residual demand by about 75 million bushels, ethanol use by 50 million bushels, and food/industrial use by 70 million bushels.
Bumper crops will put new demands on storage, transportation to markets, and lower unit prices per bushels.
On day last week, 20 large grain trucks were lined up at the Burgess Grain storage complex in Clinton, KY. The corn bins at this complex hold an average of 600,000 bushels each. Space is filling up fast.
If the grain isn't moved before next spring's crop, the glut will further reduce prices. The good crop year can morph into too much of a good thing if train and barge space cannot be freed up to carry farmers' crops to market.
Transportation issues are becoming acute and federal regulators have already called two rail companies on the carpet to explain why crops are not getting moved. BNSF and Canadian Pacific representatives were called to a hearing before the U. S. Surface Transportation Board to explain why crops from the Upper Midwest weren't getting moved on their carriers fast enough. (follow More for Wall Street Journal report.)
An improving economy is increasing rail demand for coal, oil and consumer goods. Those products appear to be getting preference over farm crops. The shipping slowdown and increased competition for transport space will impact market prices for winter markets and exports.
The question is "How much below $3.00 per bushel can the farmers take and still make a profit?" The market is now moving from $2.85 to $3.75 per bushel.
Of course, if there are any crop market losses, a new Farm Bill could generate USDA funds to the farmers to cover their market losses. But with a depressed market, federal help is not predicted to stretch far enough to turn this year from a good news/bad news year to one that's all good.
During this harvest, farmers are already thinking of the tough decisions and the educated guesses they will have to make as the crop for 2015 is planned.