Wet weather last week in Iowa made it difficult for farmers to continue the 2010 crop harvest. A few farmers made limited harvest progress. But this week farmers across the state are getting back into their fields.
The weekly weather and crop conditions report, issued September 27 by the Iowa office of USDA's National Ag Statistics Service, says 91% of the state's corn acres are now at or beyond maturity and 8% of the 2010 crop has been harvested - both crops are 5 days ahead of last year and the 5-year average.
Nearly 95% of the soybean acres in Iowa have turned color, ahead of last year's 94% but equal to the 5-year average. Harvest of Iowa's soybean acreage is now 7% complete, ahead of the 5% that was complete at this time last year but behind the 5-year average of 15%.
It is unusual to see crop prices rise during harvest time
Prospects for drier weather this week have eased concerns about crop conditions. Corn prices had reached two-year highs by the end of last week as harvest slowed. But a good 7-day forecast for this week has prompted prices to ease. Corn declined to $5.13 yesterday (Monday September 27) for December delivery on the Chicago Board of Trade. The corn market has also has seen a strong wave of selling in recent days by farmers who wanted to take advantage of the highest prices since September 2008.
Corn and soybeans have been trading this fall at above $5 for corn for the December futures contract and above $11 for beans on the contract for November delivery. The cash value of Iowa's corn and soybean crops has risen significantly since mid-June when corn futures were $3.45 and soybeans $9 per bushel. USDA will provide a better handle on the size of this year's corn and soybean crops when it issues it's next official monthly estimate - the October Crop Report - on Friday October 8. That is an anxiously-awaited report.
Sell corn, beans now or hold for possibly higher prices later?
"The big decision for farmers this fall is whether to sell at harvest or store and wait for possibly even better prices," says Steve Lange, who farms near Storm Lake in northwest Iowa. He's doing some of both.
The market is offering good prices this fall but the fundamentals show potential for continued strength. Exports have recently fueled the surge for corn and beans. Corn has benefited from drought in other parts of the world and demand is strong from processors and ethanol producers.
The size of the 2010 harvest of corn and soybeans in the U.S. is still a question mark and that also adds to price strength. The U.S. corn crop looks like it will come in shy of USDA's earlier projections. Soybean estimates have been trimmed a little by private analysts. Iowa farmers say corn yields this fall are disappointing, with many fields down as much as 10% to 15% from last year due to damage caused by too much rain in 2010. Farmers are more optimistic about bean yields than about corn yields this fall.
Farmers more optimistic about bean yields than corn this year
Many farmers in Iowa are reporting corn yields 10% to 15% less than last year. "If you're used to getting corn yields around 200 bu. per acre, that's a big hit," says farmer Warren Gilman of Dexter in central Iowa. "This year there's so much variability, not only field-to-field but within fields. You see 180 to 200 bushel corn on the yield monitor then watch it go down to zero in places in the field where the potholes and low areas drowned out."
In addition to flooding damage and too much rain during the growing season, Sudden Death Syndrome disease in soybeans whacked many fields, especially in central and southeast Iowa. Dick Freeman near Carlisle is harvesting relatively better soybean than corn yields but his beans are in the 50 bu. per acre range, down from 60 or more bushels per acre the last few years. On corn, leaf diseases thrived in the extremely rainy growing season and have taken their toll.
Government decisions on ethanol will impact corn prices
Upcoming decisions that will be made in Washington, D.C. will impact crop prices. Will the federal Environmental Protection Agency approve the use of E15 ethanol, the 15% blend with gasoline, nationwide? Will it be allowed for use in all cars or just the newer models? Currently E10, the 10% ethanol blend, is all that is allowed to be used in non-flexfuel cars and trucks in the United States.
EPA's decision on whether or not to allow the higher blend of ethanol is rumored to be coming possibly as early as mid-October. Another big question mark is the federal tax credit for ethanol blenders, now at 45 cents per gallon. It is set to expire at the end of 2010.
Congress let the biodiesel tax credit expire at the end of 2009 and the biodiesel industry, now with most plants shut down or running at greatly reduced production, is still waiting for Congress to reinstate that credit. Farmers and ethanol producers are hoping Congress will extend the ethanol tax credit and avoid another fiasco.
One-third of U.S. corn crop now goes to ethanol production
One third of the U.S. corn crop is now being used for ethanol each year, so what happens with the E15 decision and also the 45 cent per gallon ethanol tax credit decision is critical. The situation is adding to the uncertainty for corn prices in the 2010-2011 crop marketing year.
Meanwhile, estimates of reduced U.S. corn production this fall have added fuel to the already hot corn market, and analysts believe soybean prices will have to rise even further for that crop to compete for acreage next spring. Tighter supplies, coupled with a looming acreage battle for 2011 are contributing to a bullish outlook.
"A lot of the older farmers in my neighborhood say as soon as the election is over this November, the price of corn and beans will go back down," says Lange, the northwest Iowa farmer. "Whether that's true or not, I don't know. But I do think that the big crop isn't as big as people thought it would be, especially for corn, and it will take strong prices to ration demand. The market will likely maintain fairly strong prices for awhile, until the market gets things sorted out."
This fall's harvest is example of a "short crop with a long tail"
High prices at harvest are a rarity. This fall is an example of a crop coming in shorter than expected, corn and soybean prices running up at harvest and then likely riding a slow downtrend for the rest of the marketing year. It's called a "short crop with a long tail."
Farmers should be looking at marketing some of their crop in the next few weeks or months and be watchful for opportunities to lock in profits, says Steve Johnson, an Iowa State University Extension farm management specialist. At some point the price rally will stall as buyers decide not to expand livestock and ethanol production. "Harvest time may be a good time to market some grain during a short crop and this is looking like a short crop," he notes.