June 7, 2007

Expected huge US corn harvests could create storage problems

An agricultural economist from the Ohio State University says the anticipated huge corn crop this spring could spur problems on grain storage.

Economist Matt Roberts says a US crop of 12.5 or 13 billion bushels could also result in lower cash prices compared to futures prices. The government, he said, must provide incentives to farmers who will provide their on-farm storage to get through the pressure of harvest.

Roberts said an additional 500 million to one billion bushels of corn more than 2004-the year that faced serious storage and transportation issues-should compel more pressure in grain storage, particularly in corn-belt areas like Iowa and Illinois.

Roberts says the problem might not only be storage, but also a shift in distribution channels from rail and barge exporting to more local use by ethanol plants. He however said the boom in grain bin construction and grain elevators built over the years can store more capacity.

As summer approaches, Robert advises to have careful attention on grain storage management as growers can easily store corn into during humid conditions.

Roberts says it can get costly to store grain, but the biggest costs in storage will not be management costs, they will be opportunity costs - the idea that stored grain at US$3.50 or US$4 a bushel on the market is not sitting in the bank earning interest.