US farmers may withhold grain crops until they see price rise

Global food companies and livestock feeders hoping for an abundance of low-price US grain may be in for a disappointment as it looks like American farmers may opt to delay additional sales of corn and soybeans.

Several years of profitable crops have left US farmers with enough cash to hold back the year’s harvest and wait for a better price. While the US agriculture department has forecast huge corn and soybean crops this autumn, these rich farmers have enough on-farm grain storage to hold onto much of their crop until prices rise.

“The US farmer has never been in a stronger financial position in the history of farming,” said Tom Grisafi, president of agri-advisory service Trade The Farm. “They have a tonne of money and they have more onsite storage than ever.”

One sign that post-harvest selling may be slow is the decline in pre-harvest business. Farmers often sell a portion of their crops months before firing up their harvesters, but this year that selling has been slow.

“What you are looking at is the historically small amount of grain that the producer has sold,” said Joe Christopher, a grain merchandiser at Crossroads Co-Op in Sidney, Nebraska, referring to deals for corn and soybeans that will be harvested in the fall.

Commercial purchases of grain from the upcoming harvest are running about 20% of normal for this time of year, Christopher said.

“There is a wealth factor that is in play. They have had three or four years of very good returns. They are probably as well financially fixed as they have ever been.”

While last year’s drought, the worst in the US since the 1930s, cut yields, it also pushed crop prices to record high levels. So those lucky farmers who harvested a crop then were paid handsomely for it.

Even this year farmers should do well. The agriculture department has forecast net farm income for 2013 at $120.6bn (€90bn), up 6% from a year ago and the second highest in 40 years, when adjusted for inflation.

The forecast calls for a US corn crop of 13.763bn bushels, up 28% from 2012, and a soybean crop of 3.255bn bushels, up 8%.

Lengthy planting delays in the spring have pushed midwest corn and soybean development well behind normal. That immaturity left growers less confident than usual about the size of their crops and contributed to their reluctance to commit to pre-harvest sales.

“I am not sure exactly what we are going to have out there,” said Andrew Goleman, an Illinois farmer, who has only committed to sell 0.5% of his expected harvest. In a typical growing season, he would usually have deals for 40% of his crop by the end of August.

The price weakness is another factor that has kept farmers from pulling the trigger. Corn futures have fallen 29% since Jan 1 on the Chicago Board of Trade and were 38% below year-ago levels. Soybean prices have fallen 4.3% so far this year.