CHICAGO, Ill. (Reuters) — With record harvests depressing prices, U.S. farmers are holding tight to their corn and soybeans and binging on chemicals that protect stored grain from insects.
Farmers have resources to store grain rather than sell into a down market because they are still flush with cash after years of record income. As well, shipping rates are near record highs.
“The last several years we have not held on very long,” said Mike Brzon, who grows corn, soybeans and wheat on his farm in Courtland, Kansas.
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“This year we might be in a little different situation.”
Many farmers and grain elevators are pre-treating storage bins with insecticides capable of keeping grain bug-free for 18 month, knowing they may store their grain well into next year.
“We treat the bins before we ever put a kernel of grain in it,” said Kent Moore, a farmer from Iuka, Kansas.
A record U.S. harvest of 14.5 billion bushels recently had corn trading around US$3.50 a bushel, down 56 percent from record highs set in August 2012. Soybeans have fallen more than $8 per bu. to around $9.65 on a record harvest of 3.9 billion bu.
Paul Drache, regional manager at insecticide maker Central Life Sciences, said some producers are delaying the decision by planning to treat their grain later if need arises.
“In an environment where the commodity prices are down, they will typically try do a rescue rather than a preventative because they don’t want to spend the money now,” Drache said.
Central Life’s Centynal is applied to grain as it is put in storage bins.
Increased sales could be a boon Central Garden & Pet Co., which owns Central Life, as well as Dow AgroSciences, which sells another leading insect regulator, ProFume.
Applications of the pesticides are carefully calibrated to fall within government standards to keep the grain safe for human and animal use.
Elevators and farmers who store grain in bins and on the ground need to prioritize which will move out first. Grain stored in bags will be the first to go. The bags are believed susceptible to insect invasions.
“That is the first thing that gets shipped,” said Wes O’Bannon, chief operations officer at FarmWay Co-op in Beloit, Kansas.
Some farmers are leaving their corn standing in fields, hoping higher spring prices will make it worth harvesting. However, they risk seeing winter storms destroy its value.
“Even though you are going to encounter some yield loss, it still might not end up being a bad economic play at the end of the day,” said Tregg Cronin, a market analyst at Halo Commodities, who also works on his family farm in Gettysburg, South Dakota.
“You can store it in the field for free.”
