Minnesota corn farmers blindsided by USDA report showing bigger-than-expected corn glut
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The USDA released new data showing corn production was much higher than previously expected. The news sent already depressed corn prices tumbling.
The January World Agricultural Supply and Demand Estimates report provides forecasts of corn production from the previous harvest season, making it a newsmaker because it often sets the tone for markets.
Before the report was released, ag analysts expected yields to hover somewhere around 16.5 billion bushels. But the USDA report projects that farmers produced more than that, pulling in 17 billion bushels
Megan Roberts, an agricultural economist for Farm Credit Cooperative, Compeer Financial, said that is a new record in U.S. corn production.
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“It's really hard to wrap your head around how big 17 billion bushels is,” Roberts said. “That was shocking to the market, because it is now the record corn production ever in the U.S.”
The higher production level was driven by increased harvested acreage and higher yields.
Roberts added that, after accounting for expected corn exports and commercial use, there will still be over 2 billion bushels left to deal with.
“It is a challenge right now for our supplies of corn in the U.S. to have enough equivalent demand to use it up,” Roberts said.
The report dealt a blow to many farmers, including Rob Tate of Cannon Falls.
“It's discouraging,” Tate said. “I was surprised and discouraged at the same time that, OK, this is what we have to deal with.”
He had already sold a fair amount of his corn crop last year, but has a sizable amount leftover to market. His hope was to barely profit from the harvest.
“But now, throwing this into the equation, I strongly question whether we can achieve any break-even levels or not,” he said.
Tate added that he wouldn’t feel as worried about the crop’s overabundance if there were more markets that could take in farmers’ crops. Personally, he believes the path forward for corn is in domestic uses, such as ethanol production.
“There are always issues that come up internationally, whether they're market-driven forces or other ones,” Tate said. “If we have the domestic demand here, we use the corn here; that's very valuable, and that's probably from a long-term standpoint, a good pathway forward.”
For now, though, he’s accepted that he’ll likely sell his crops at a loss.
Nathan Collins, a farmer in Murdock, said he plans to sell his own leftover crops from now until July. But throughout that process, he’s trying to figure out how to best market them.
“Now you have to reevaluate what you're going to sell your crop for on the balance sheet,” Collins said. “If you still have crops sitting in the bin or sitting at the elevator, you just lost a lot of money.”
Both Tate and Collins said they were used to the USDA’s January reports rocking markets and their balance sheets.
And yet, Collins said he still hopes this year will fare well for his business, noting that farmers are “eternally optimistic.”
“Otherwise,” he said, “we wouldn't spend every dollar we make putting the crop back in the ground for next year to not be better.”
