Low prices and strong yields have northern Plains farmers scrambling to find grain storage, particularly as elevators show signs of limited availability for soybeans amid a lack of Chinese purchases.
Corn producers are projected to harvest a massive 16.7 billion bushels this year at an estimated average price of $3.90 per bushel, according to August USDA estimates. Such prices are already causing farmers to hold back their grain, but many face a second problem: China, typically the biggest buyer of U.S. soybeans, has not yet put in a single order for the crop.
So, producers are scrambling to figure out if they have enough storage to hold back their grain in hopes that more markets and better prices emerge. Many do. However, in the northern Plains, where elevators are already showing signs of limited capacity, some may have little choice but to use bunkers, bags or outdoor piles, particularly in areas hit by bin-crumpling windstorms earlier this year.
“I think a lot of guys are scratching their heads about what to do with their soybeans,” said North Dakota Soybean Growers Association President Justin Sherlock, who has heard estimates of between 60 and 100 million bushels worth of North Dakota grain storage being lost in storms. A North Dakota State University survey found damage to some nine million bushels of storage, but NDSU ag policy professor Matthew Gammans said that’s "almost certainly" an undercount.
Current estimates suggest the U.S. has a total of 25 billion bushels of grain storage capacity, enough to store the 23.8 billion bushels of grain expected to be harvested this fall, according to University of Illinois economist Joe Janzen. However, this storage may not be in all of the areas that need it, he added.
“In a sense, we’re not really physically constrained, except in some very specific geographies,” Janzen said. "So, I think that will sort of happen in a place like North Dakota this year with corn and soybeans — you will see the elevator system being kind of plugged and farmers looking for places to store it.”
Estimates by Terrain economist Marc Rosenbohm suggest the grain produced in North Dakota this year could exceed the state’s capacity by 32%. He found that most Midwestern states and some in the South could also have more grain than they can store, particularly Louisiana, Tennessee, Kansas, South Dakota and Missouri.
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“In some parts of the country, especially in the upper plains, we’re going to produce more than we have storage capacity. And that's a challenge,” Terrain's John Newton said on Agri-Pulse Newsmakers last week.
Demand limitations on full display in North Dakota
More than 90% of North Dakota’s soybeans is exported in a normal year with a large portion sent to China, according to the North Dakota Soybean Council. But so far this year, China hasn't made any purchases, leaving the state's farmers scrambling to find markets.
“North Dakota has kind of always been in a tough spot, because it’s far removed from a lot of the big geographic demand centers for corn and soybeans,” Gammans said, noting that limited crush capacity in North Dakota has made exports particularly important to the state’s farmers.
Soybean basis in North Dakota has significantly weakened, with bids falling around $1.51 below the futures price. Essentially, grain receivers are sending a message to farmers that “we don’t have confidence that we can do something with those soybeans,” said Soy Transportation Coalition Director Mike Steenhoek.
Fears of elevators halting soybean purchases have spread in parts of the state, though to Sherlock's knowledge, no elevator thus far has “flat out” said they’re not going to take soybeans. Instead, some may only accept contracted beans.
“All of the elevators that we’ve talked to said they intend to honor their contract, but they may not take spot soybeans,” Sherlock said. "So, if you don’t have them contracted already, you’re probably not going to be able to show up at the elevator at harvest like usual and dump your load of soybeans.”
Stu Letcher, executive vice president of the North Dakota Grain Dealers Association, said “elevators are going to honor the contracts that have been made.” Some may pivot to cash-only sales, and there may less use of “price-later” type of contracts than normal, he added.
“Each individual situation at each company is going to be a little different,” Letcher said.
Some farmers are likely to attempt to hold back their grain, but limited on-farm storage capacity may limit their options. Farmers without bin space access may turn to bunkers, bagged systems or piles, but that could increase spoilage risk if these systems are used incorrectly, said Gammans.
If China doesn't purchase soybeans, near-term prices may not improve much, he added.
“We're already seeing really low basis numbers and there’s not a guarantee that they won’t go lower,” Gammans said. “So, if we get into a situation where there’s tons and tons with no storage for it go, these could fall even farther and you can see farmers selling at very low prices to avoid spoilage risk.”
Northern Plains farmers weigh storage options
When harvest season kicks into full swing in Southern Minnesota, Darin Johnson is expecting to see fellow farmers race to their local coops with loads of soybeans “knowing that they could potentially go full.” He said his local coop is still accepting spot sales, but he is unsure of how long that will continue into the harvest season.
“We don’t know how far you’re going to get. Heck, we might only get four or five days in, and that’s it,” he said. “Then you’ve got to think about it a little bit — where can I go with the rest of this soybean crop?”
Johnson did say that on-farm storage has seen a fair amount of expansion in his region in recent years. Southern Minnesota farmers also have access to several crush facilities, which will help farmers “chew through a lot of inventory in a quick hurry,” he said.
Further south, Iowa Soybean Association Senior Director of Market Development Grant Kimberley said expected corn and soybean yields could exceed the state's storage capacity by 143 million bushels. However, it's normal to see more supply than storage in years when Iowa farmers have good yields, and the state has an abundance of processors that may be able to take in some of the excess grain.
"It probably won't be much more than a normal year for Iowa," Kimberley said. "You get into other states in the country, especially those states in the Great Plains that are used to [shipping grain] west to Asia all the time, they're the ones that are going to really feel it."
Sen. Mike Rounds, R-S.D., told reporters Monday that a lot of farmers in his state are trying to figure out a way to either store their crops “or to get it out of the bin and into the market at a time in which the market is full.”
"We know that we’re [limited in] availability for space for this bumper crop coming in, and prices are down, basis is up, which is not a good thing for us,” Rounds said.
Brandon Lindstrom, who farms in Cass County, North Dakota, is preparing to begin harvesting soybeans at the end of this week. He plans to utilize the 300 acres worth of storage that he normally has access to, but is also talking with neighbors about potentially using some of their vacant bins as well.
“We’re actually heavy on bean acres this year,” he said. “A lot of guys aren’t. My thought process was, ‘hey, everyone else is growing corn. Someone’s got to grow some beans. Maybe I’ll look smart come October.' But it’s not really playing out that way."
Lindstrom does have access to a nearby crush plant, which he said is “really beneficial.” He said he also does a lot of forward contracting with elevators.
While Lindstrom said a lot of farmers are concerned about trade with China, he believes it will ultimately need to strike a deal with the U.S. to meet its demand for soybeans.
“There might be some pain right now, but if we can ride it out as farmers, we should have better markets in the future,” he said.
