This fall, and in fact this growing season, has been a difficult one for corn producers who have had to deal with less than ideal weather conditions, which are now slowing harvest progress. These struggles were reflected in the Nov. 8 crop progress report from USDA.
“There weren’t any real big surprises in the report for either corn or soybeans, although USDA did bring the national average corn yield down just a little bit, about 1.5 bushels from 168.4 bushels per acre (BPA) to 167 BPA,” said Frayne Olson, grain marketing economist at North Dakota State University. “Most of that was already baked into the market.”
Olson noted the trade was expecting a slight reduction, adding that USDA didn’t do anything with planted or harvested acres. Odds are USDA won’t make any of those updates or changes until January.
“USDA took total production down, but they also shaved a little bit off of total use,” he said. “The net was a small reduction in the forecast for carryover stocks, so we tightened things up a little bit. But I think a lot of farmers are disappointed (USDA) didn’t tighten it up a little more given the challenges we’re having here in North Dakota and South Dakota, but also in some of the core corn states. We’ll have to wait and see.”
Olson pointed out that farmers are “just kind of getting into the corn harvest up here” and there is some concern about light test weights and discounts that are going to be applied for the light test weights. Obviously, given the cool, wet weather of late, high moisture is also one of those ongoing problems that producers and the market are going to be dealing with for quite a while.
Nationally, Olson said, the crop report was relatively neutral and maybe somewhat positive for corn, adding most people felt it was kind of what they expected.
Looking forward, one of the things Olson will be watching very closely is what USDA does first with harvested acreage. He thinks those harvested acreage numbers will slip a little.
“I think we’ll continue to see some of the yields soften because of light test weights,” he said. “Later on this winter, one of the things I’ll also be watching for is I suspect USDA will slowly start increasing corn usage, again, mainly because of the test weight problem.”
He explained it this way. If you normally feed x pounds of corn, and you continue to feed that many pounds of corn of light test weight corn, growth rates remain almost identical. But it’s taking more bushels because a bushel is a measure of volume and not a measure of weight. So producers are actually feeding more bushels to get the same pound of corn.
A similar thing happens within the ethanol sector.
“There’s a little bit more drag there, it’s not quite pound-for-pound, but it’s close, so in order to get the gallons of ethanol required you’re going to have to increase the quantity of corn they buy and process to get the same level of ethanol,” he said.
“I do expect to see USDA slowly change these numbers over time. It’s not going to happen overnight,” he added. “I don’t expect a big shock value to it, but I do think that corn balance sheet will continue to tighten up as we move throughout the rest of the winter.
“Of course, that will then give a little bit more caution and concern about how fast will we be using this up? Exports are also going to be a big part of that.”
Regarding corn harvest, although Olson didn’t have any real solid yield numbers yet, he said results are going to vary significantly across the region. There’s going to be areas where test weights will be pretty good, as will yields, but there will also be areas where test weights are light and yields down. There are also going to be some pretty healthy drying charges.
Olson noted he has been getting a few questions about test weight discounts and how steep or aggressive they are.
“It does vary a little bit from location-to-location. They’re very similar, but I don’t know that they’re going to have huge differences, but there are some,” he said.
“I do think that the cash market, now as we move into harvest and then obviously later into winter, there’s going to be quite a few test weight problems around the country, not only in North Dakota, but Minnesota, and into South Dakota and parts of Iowa,” he continued. “I don’t really think that discounts for test weight are going to change any throughout the winter.
“Sometimes farmers will ask me the question: ‘If I put it in the bin right now, can I wait long enough to get the test weight discounts to soften some?’ In this case, the answer is no,” he said. “There’s going to be too many bushels of light test weight corn. We’re going to be discounting for this entire marketing year. Don’t expect to be able to store your way out of the test weight problem.”
Local cash bids in east central North Dakota and western Minnesota for immediate delivery right off the combine are around $3.10-$3.20. If producers are willing to store it into the winter, they may get $3.25, or $3.30 if close to an ethanol plant for February/March delivery.
At one local elevator in west central Minnesota regularly followed in this column, as of Nov. 13, the November cash price for corn was $3.43 and basis was -32 cents under. June 2020 cash price was listed at $3.54 and basis was -42 cents under.
The biggest challenge for both corn and soybeans this harvest season has been the cool, wet weather. The soils have been so saturated and now that the region has experienced colder than average temperatures the ground is definitely firming up, allowing producers to get out in the fields.
“Anytime that you can drive up and down without worrying about falling through and getting stuck is a big deal and it increases your efficiency,” Olson said. “The challenge, of course, is if you’ve got those low spots where there’s a lot of water in them. It takes a lot longer for that stuff to freeze up so you can combine.
“The cold weather is definitely helping. It’s kind of tough on equipment, trying to get things started and running in the morning, and grease in the bearings gets pretty stiff when its only 5 degrees, but at least you can go,” he added.
One of the other factors producers will have to deal with is that the corn is coming off wet and drying is going to be slow.
“Propane supplies are tight. They’re burning through it really fast,” Olson said. “It takes a lot of heat units or BTUs to warm it up enough to dry the grain.
“Mother Nature just gave us a really tough fall to deal with,” he continued. “The main issue is just getting it out of the field and I know farmers are waiting for USDA at some point to make this big change in the numbers to give us a rally, but I’m not sure that’s going to be coming quite yet.”