Harvest, prices excite market
CHAMPAIGN – A final government harvest report Friday sent corn markets into a frenzy.
"Markets have gone crazy," said Brian Stark, a grain buyer at The Andersons, who was right in the middle of the action at the elevator northwest of Champaign. "They're up the limit."
"It's the ending stocks that really set them off," said Pam Jarboe, assistant manager at Topflight Grain Co. based at Bement.
Government analysts dramatically dropped the numbers showing the supply of corn on hand from last month's estimate, 935 million bushels, to 752 million bushels. That compares to the average trade estimate of 901 million bushels for this month's report.
Last year, ending stocks of corn were about 1.97 billion bushels.
Also feeding the corn price frenzy are prospects for ethanol – fuel alcohol made from corn. The government has made moves to create a preference for ethanol as a fuel additive; nationwide more than 70 new ethanol plants are planned; and investors and traders are looking at unprecedented future demand for corn.
"These are fun times for farmers," said John Reifsteck of rural Champaign, who said Friday's frantic market action is hard on farmers' nerves.
Reifsteck remembers selling corn on the futures market for prices in the $5 range, but he said he never remembers corn cash prices in recent history as strong as they are now.
Topflight's cash price Friday was $3.77 for corn and $6.87 for soybeans. Futures prices for corn were in the $4 range and soybean futures prices were in the $7.16 range.
"The fall prices are impressive," Reifsteck said. "The market's been such a roller coaster ranging from 30 to 40 cents. I thought it was over the first of December, then it went up, prices tanked the first of the year and now this. It's hard to know what to do."
Friday's government numbers show crops in Illinois set near records, but nationwide production was down. Illinois farmers grew 6 percent more corn than they grew in 2005, 1.817 billion bushels, and yields averaged 163 bushels per acre, up 20 bushels from the previous year's yield.
Nationwide, production totaled 10.5 billion bushels, down 5 percent from 2005. Average yields were 149 bushels per acre, 1 bushel per acre more than in 2005.
Farmers grew 10 percent more soybeans in Illinois than they did last year, 482 million bushels, the second-largest crop in history. Yields averaged 48 bushels per acre, 1.5 bushels more than in 2005.
The country's soybean crop was the largest ever, 3.19 billion bushels, 4 percent larger than the 2005 crop. Yields were about 43 bushels per acre, just slightly less than in 2005.
Stark said the harvest at The Andersons was excellent.
"Our corn yields average in the 180- to 200-bushel range and soybeans were in the 55- to 65-bushel range," he said.
He said the corn market was up the 20 cent limit Friday.
Stark said The Andersons has shipped out all the corn it put on the ground after harvest.
Jarboe said her 12 elevators moved about 21 million bushels during harvest. Corn yields averaged more than 170 bushels per acre and soybeans were in the 55-bushel range, she said.
"We bought about 80 percent of the corn crop by the end of harvest," Jarboe said. "There's not a lot of old crop locally to buy. Farmers are selling some old crop, but they're also selling new crop heavily today."
Reifsteck said markets are giving farmers excellent opportunities to lock in profits.
"I don't think we can afford to ride it out," he said. "I'll take a look and make some sales. Not everything. I always do it over a period of time, but I've been more aggressive recently. These are great opportunities."
Reifsteck said he looks at the ethanol picture that's giving markets such a boost as another opportunity for farmers.
"There are a lot of projects on the ground that may or may not get built," he said.
"They're trying to attract capital and they'll have to go outside. With higher corn prices and lower crude prices, some of that money may not be attracted to ethanol."
But to farmers, those investments make sense because they win on both sides of the equation, Reifsteck said.
"As a farmer, I'm looking at ethanol as a hedge," he said. "How would it not work? If corn prices are high and energy costs are low, that's good for me, too. You don't want to be last in, but it's a natural hedge."