Let's say you're set up to dry and store most of your corn on the farm in a normal year. This year isn't normal, and your yields are off somewhat. You've already determined you can store all of your corn at home without taking any to the elevator or selling any straight out of the field in the fall. In fact, you may not even have enough corn to fill all of your own bins. So what would be your incentive to sell corn now?
That scenario is likely to play out over a wide swath of Indiana as this fall unfolds, notes Chris Hurt, Purdue University ag economist. Areas where corn yields are off a little to a lot are likely to have excess storage space, both at commercial elevators and perhaps even on farms. That will be especially true on farms that have expanded their storage and grain handling capacity in recent years.
The answer to the question, why would someone sell now, Hurt says, is that they likely won't unless there is an incentive. After all, commodity prices, while still at historically high levels, are well of their late summer highs. Someone who looks at carryover stocks and projected U.S yield might be tempted to hold out for price moves. Whether that happens may depend upon when and if the global economy settles down, Hurt implies.
So to get grain, local elevators with end users who want corn, or end users directly, like livestock operations for ethanol plants, may have to bid up for corn in some parts of the state, Hurt observes. He expects that since there is more storage than there will be demand for storage space, elevators may get competitive in deals they're willing to make. In a normal year, they count on storing charges for part of their income stream. This year, instead, that space is likely to sit unused, generating no income, unless they can entice farmers to sell.
What Hurt is talking about is a stronger than normal local basis in areas where yields are low. Typically in years like this one, the basis tends to get stronger around harvest, and stay strong after harvest ends, often into the next year. Basis is the difference between the local price for corn and the Chicago Board of Trade price.
If you're in an area with a strong basis, it may help you get a somewhat better price for corn than those in areas where overall yields over a large area are higher.