U. S. Corn — Plenty Of It, But Quality Poor

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Atwo-tiered market for corn is developing across the U. S. Midwest as processors and ethanol plants boost bids for high-quality supplies and penalize farmers for delivering subpar grain.

The pricing dynamic is expected to become more pronounced as a portion of a record 13.2-billion-bushel crop remains in storage while warmer weather in the coming weeks may cause some of that corn to spoil, analysts and crop experts said.

“The market is completely saturated with bad corn right now,” said Charles Hurbaugh, professor of agricultural engineering at Iowa State University. “This year’s corn has about half of the expected shelf life than what grain managers would normally expect.”

Two Bunge North America processors in central Illinois have offered 10-cent-per-bushel premiums for corn with test weights above 56 lbs. – the minimum weight to qualify as No. 1 yellow corn.

Premiums of 15-20 cents were offered elsewhere in the Midwest

Vomitoxin threat: Diplodia ear rot (seen here) and other fungal infections thrived in last fall’s cool and wet harvest in the U. S. corn belt. – Iowa State University

for corn 57 lbs. or higher, grain merchants said.

Processors are bidding aggressively for the No. 1 corn so they can “blend up” the subpar supplies they received during harvest.

“I can offer a 50-cent premium at 58 lbs. in a certain area. You know how much corn I’m going to get bought? Zero. There is no corn in the area that qualifies,” said Bill Lettunich, senior hedging adviser at the Grain Service Corp. in Atlanta.

Benchmark corn futures at the Chicago Board of Trade require No. 2, with at least a 54-lb. test weight. Some farmers have delivered No. 3 and No. 4 corn, with test weights less than 50 lbs.

“It’s a (corn) belt-wide phenomenon,” said Rich Feltes, director of research for MF Global, adding that farmers will likely increase corn sales in the coming weeks before it has a chance to rot in storage.

“We are going to be facing a deluge of corn in the next 60 days,” Feltes said.

Mould in both east and west

An unusually mild summer was bookended by a wet spring planting season and a wet harvest. The result was a delay in corn planting, corn not maturing as quickly during the cool summer months, and then staying in the fields long after it was ready for harvest.

East of the Mississippi River, Gibberella and Diplodia ear rots thrived in the moist conditions, creating elevated amounts of the plant toxin vomitoxin, which can sicken animals if consumed in large amounts.

In Iowa, hailstorms decimated some fields and there were higher-than-normal levels of the non-toxic cladiosporium mould that can slow kernel growth.

Many growers put corn in on-farm storage with high moisture levels. A Council Bluffs, Iowa, grain buyer said corn deliveries continue to come in at more than 20 per cent moisture, compared with the preferred 15.5 per cent.

Farmers often delay corn sales until the seasonal price pressure during harvest subsides. But the rain was followed by snow and, by the end of the year, there were still millions of bushels of corn left in the fields.

Quality issues and harvest delays aside, the sheer size of the crop has weighed on the price, with spot corn futures declining by 8.5 per cent this year.

“(Farmers) have to make some choices,” Iowa State’s Hurbaugh said. They’re going to be “squeezed” by wanting to hold the grain due to the depressed price but risking further deterioration in quality.

Basis bids in the cash market have risen sharply in February due as much to efforts to increase farmer selling as to decreases in price and in shipping costs, said Kevin McNew, president of Montana-based Cash Grain Bids Inc.

“We’ve had 20 cents of basis gains in corn, which is exceptionally strong. Normally, we figure three to four cents per month is the norm in basis gains,” McNew said.

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