Harvest or the lack of it during the first half of October was much different than September. Central and southern Ohio took advantage of great harvest weather in September. Unfortunately that came to a halt as the first two weeks of October had more rain days than all of September.
Corn yields continue to be above average for much of the Midwest as many producers report record breaking yields. Illinois also had plentiful rain early last month as the Decatur and Springfield areas had as much as six inches in a two day period bringing harvest to a halt. Stalk quality has deteriorated, making the threat of high winds a huge concern. U.S. corn harvest progress by the middle of October was just 24%, while soybean harvest was 40%. Further examination revealed some states were 20% below average for corn or soybean harvest by the middle of October. Weather forecasts indicate November weather across the Midwest could be wet and cool. Producers should expect a long harvest period this fall. With record corn and soybean production already a reality, transportation bottlenecks will be the norm across the Midwest this fall. Rains will delay harvest but it will permit grain facilities the opportunity to get ready for the next onslaught of bushels coming to town.
Transportation crunches and bottlenecks are pushing basis levels to even wider values than normally seen during harvest. Last month, parts of the Dakotas were seeing corn prices in below $2, putting the local basis at roughly $1.30 under the Chicago CBOT December contract. Barge freight along the Ohio and Illinois rivers set new record highs. Corn basis levels in Cincinnati were $.52 under. This is a level not seen for at least 10 to 20 years.
Grain facilities in North Dakota, South Dakota, and Minnesota continue to be plagued with the lack of railcars. The sharp increase in shipping volumes of Bakken crude oil moving by rail from the oil rich boom town areas in the Dakotas catches much of the blame. Grain movement from the north in Canada continues to see the same problem in spite of fines of thousands of dollars per day being levied upon the railroads by the Canadian government.
With the Keystone pipeline still not underway, crude oil from North Dakota, Montana and Saskatchewan continues to move by railcar. Crude oil volume by the BNSF Railway Company was 1.3 million barrels in 2008. In 2012 it reached 89 million barrels for an unheard of increase of 7000%.
The soybean pipeline continues to be less than full in spite of record production and yields. Exports from the U.S. Gulf continue to be strong. Harvest started in southern states with producers determined to sell as many bushels as possible at unheard of high basis levels. The pipeline struggled to get huge amounts of bushels in position fast enough for loading at New Orleans ports. Exporters had the lift capacity for September, October, and November booked by mid-summer as they were anxious to meet importers’ strong demand for soybeans. Much of that volume would be shipped to China.
December CBOT corn reached $3.18 in early October and then rallied to $3.58 1/2 on the rain delayed harvest and short covering. With corn production at record levels of 14.475 million bushels and a U.S. yield of 174.2 bushels per acre, December CBOT corn will struggle to reach the $3.80 area without a now unknown demand or weather event. Grain prices mid-October experienced extreme volatility with soybeans seeing price ranges of over 20 cents in less than an hour.
The Ebola virus fear and fears of world economies slowing down has traders on edge as they are contributing to the old axiom, “When in doubt, get out.” Producers seem very willing to store as much of the 2014 corn as possible.