Corn Crop Uncertainty Raises Volatility for Grain Elevators

(GREENWOOD VILLAGE, CO) Grain elevators and end-users are navigating heightened market volatility as the size of this fall’s corn harvest remains uncertain. After historic planting delays from nonstop rains this spring, the crop is late in maturing, especially in the eastern Corn Belt (ECB) states of Illinois, Indiana, Michigan, Ohio, and Wisconsin as well as North Dakota and South Dakota in the western Corn Belt (WCB). According to CoBank’s Knowledge Exchange Division, the delays could signal major losses in crop production this fall, raising the stakes for grain merchandisers and end-users like ethanol producers and livestock and poultry feeders. The historic lateness of this year’s crop means that a normal or early frost in October could severely crimp farmers’ yields and reduce harvested acreage. Volatility has plagued corn basis and carry in the futures market since spring, jeopardizing grain elevators’ ability to acquire bushels and profit on this fall’s corn harvest. Grain handlers will most likely need to compete for bushels in regions that are corn-deficit. This can be done by enticing farmers with higher cash bids (and higher basis), or by offering delayed pricing. If old-crop bushels cannot be acquired ahead of harvest and if new-crop bushels are not secured at harvest, elevators stand to face a tough marketing year ahead with mergers and acquisitions increasingly likely.