How will the drought that struck a large area of Iowa and the Corn Belt this summer influence aflatoxin and other diseases of corn? What implications does that have for feeding the 2012 corn crop to livestock? How about harvest considerations this fall -- recommendations for combine settings and other tips for harvesting a drought-stricken crop? What's ahead for livestock and crop markets?
Those were some of the main topics covered in a webinar sponsored by Iowa State University Extension on August 21. The webinar is has been archived and is now available for viewing by clicking on Aug. 21 Webinar on Drought-Related Crop Issues Available for Viewing.
There were also question and answer sessions after each speaker made their main presentation. Those questions and answers are also available for you to read at the archived site. For example, ISU Extension grain marketing economist Chad Hart answered the following questions from farmers in the audience.
Question: If I still have old crop corn in storage, would it be better to hang on to that corn and sell/feed the current crop?
Answer: There are several facets to this question: What are the qualities of the old crop corn and current crop? How much do you need for feed? How much time and effort are you willing to expend to maintain grain quality in storage?
Let's start with the old crop. Corn can be stored for fairly long periods of time if the temperature and humidity are controlled. Charlie Hurburgh and Roger Elmore put together an article on storage management (link is given below, see the table at the end of the article). If you have held the old crop corn under suitable conditions, then the crop could be carried into 2013. The link is
Presumably, the current crop will be harvested at a lower quality than the old crop, either because of lower test weight and/or other grain quality issues. Lower quality corn does tend to have a shorter storage life. So it does make sense to market the lower quality corn in a timely fashion. Another issue to examine though is the current price structure for corn.
Current futures are basically flat through March 2013, with May at a 10 cent discount. So the futures market is not offering any incentive for storage. And with $8 corn on the board, you are staring at profitable prices right now. Typically we store crops either to meet feed demands over the coming year or to capture higher prices. Given the strong prices on the board now, the decision to store should be linked with a decision on price protection. Price patterns in drought years tend to peak right before harvest, fade during harvest, and then rebuild in the springtime. If you are looking to store into the springtime, using marketing tools that both protect today's good prices and allow for upside price potential (such as put options) can be a good move.
Question: Does Iowa or the Midwest have a corn price advantage over other regions?
Answer: It depends on which way you look at the market. Iowa and the Midwest tend to have lower crop prices than the national average. So for crop sellers, that is a disadvantage. For crop buyers (livestock feeders, ethanol plants, etc.), that is an advantage. The lower prices are directly related to the higher crop production levels in Iowa and the Midwest. Those lower prices and ample supplies usually attract crop buyers to locate in the Midwest; hence, the concentration of the hog and ethanol industries in Iowa.
Question: Are grain prices based on harvest to harvest and do they take into account grain preprice?
Answer: It depends on which grain price you are looking at. USDA's monthly and season average prices do account for prepriced grain. And the USDA season average price is not quite harvest to harvest, but it is a pretty good approximation. It covers grain sales from September 1 of the harvest year to August 31 of the following year.
So the 2012-13 season average price covers the period of time between September 1, 2012 to August 31, 2013. It is the season average price that I usually talk about in my outlook presentations. Other prices such as the daily prices reported in the Interior Iowa Daily Grain Prices report, are cash spot prices and do not include prepriced grain.