Large Crops Not Translating To Large Bankrolls For Farmers

Nov 20, 2014

It makes sense that large harvests should lead to large payouts -- but not this year.
Credit David Wright / https://www.flickr.com/photos/dhwright/14934151279

The truck traffic at Kokomo Grain Company is constant.

"We will process between 400 and 500 trucks a day in the 12-14 hour day at this facility," says Senior Grain Merchandiser Mike Silver.

He says all of the truckloads of corn and soybeans can add up to 750,000 bushels per day. Trucks dump the grain quickly, but a long line soon snakes around the Kokomo Grain’s entrance.

Indiana and several other Midwestern states are poised to break records with this year’s yields, so the grain elevators here are already halfway full.

And, Grain Manager Tom Madru says there’s plenty of crops that still have to be harvested.  

"It’s been kind of an unusual harvest where normally we get corn started early and then beans kick in, but we’ve had an unusually wet fall," Madru says. "So, the beans have been delayed. Normally, we’d be done with beans for about two weeks now, but we’re just finishing up beans."

But, there’s a problem – room to store the remaining crops is dwindling.  Some grain elevators are still holding a surplus from last year, because  the rough winter slowed down – and, in some cases, stopped – grain transportation.

That means farmers and storage facilities have to get creative. So Madru says Kokomo Grain Company is trying something they haven’t done in decades.  

"We’re putting a corn pad out for the first time since 1985," he says. "The volumes are really up this year and we’re anticipating that and we’re just trying to create more space so we can handle the crop issue."

Others are resorting to a more temporary method of storage – using large plastic bags or converting machine sheds into grain elevators.

The Indiana State Department of Agriculture doesn’t know yet if the state will run out of storage space before the end of the harvest.

Director Ted McKinney says if there is a problem, it will likely come with the last 10-percent of the crop.

"I’ve received some encouraging news these last two days," McKinney says. "The slow or slower harvest as a result of intermittent rains has, as we know, allowed for some grain to get the Ohio River on barges. Some trains have gotten out."

That may not be enough to free up the space needed over the next few weeks though. The cost of storing grain is already higher than the cost of producing it. And because there’s a big supply of corn and soybeans this year, the price of corn and soybeans have been dropping.

Purdue Extension Educator Paul Marcellino says that combination of factors means farmers could end the year in the red.  

"It’s hard to believe when you get such a big crop that you might be losing money," Marcellino says. "But with the prices that we may be receiving next year, if it’s still more pressure on our elevators, the basis is going to widen so the price is going to go down. So, yes, we could be in a situation where farmers are going to be losing some money this year."

Lower prices for grain could translate into steady or declining costs for livestock farmers and consumers of corn-based products – at least in the short term. It will also likely have a negative impact on farmers and the communities they live in beyond just this year. 

Some farmers are waiting to harvest a portion of their crops until December or January because values are so low. But harsh winter winds and low temperatures could damage them and cause another financial blow. Farmers could get some relief from their insurance, but the payout will likely be a fraction of their losses.