With rain delaying the U.S. harvest and domestic and export use of crops strong, the squeeze on storage space in the world's biggest food exporter is not as bad as many feared, a top grain market analyst said on Tuesday.
"We've got a lot of product to store, no question about it. But the fact that we are stretching harvest out means that every day you are consuming another 70 million bushels," Darrel Good, agricultural market economist at the University of Illinois in Champaign, said in an interview. "That reduces your storage dilemma a little bit," he added.
Iowa and Illinois, the top two corn and soy states, are ground zero for storage issues this year. In a note issued to the grain industry on Monday, Good estimated that "total fall crop supply this year likely represents about 95 percent of total storage capacity" of about 24 billion bushels.
Some grain merchants in the Corn Belt are already piling up corn in covered tarps outside, making it tough to maintain crop quality. They expect the system to get clogged with rail and barge resources tight and freight rates soaring.
"Still, not all of the supply has to be stored," Good noted. "Harvest occurs over a relatively long period of time and crops are continually consumed. Harvest has proceeded more slowly this year than in the recent past due to wet weather in some major producing areas."
The U.S. Department of Agriculture reported on Monday that the U.S. soybean harvest was 53 percent complete as of Sunday, behind the typical pace of 66 percent by the third week in October. For corn, 31 percent of the crop was harvested, versus the average of 53 percent.
Using USDA's weekly export inspections data, U.S. industry soybean crush data, and the government's latest supply and demand projections, he calculated about 3.2 billion bushels of grains and oilseeds have already been consumed from Sept. 1 to Oct. 16. That equates to 69.6 million bushels per day, for the first 46 days of the new marketing year.
"That pace of use continues so that nearly 16 percent of the total fall crop supply has already been consumed," Good said in his Monday note. "That magnitude of consumption has substantially reduced the requirement for crop storage capacity, resulting in a modest strengthening of the corn and soybean basis in many areas."
Good pointed out that while the overall storage issues may have been eased somewhat, the regional bottlenecks, including in the core area of Iowa and Illinois, will persist this fall. Rail locomotives and crews tied up by shale oil industry demands in the Dakotas remain a key issue, he said.
"From a production standpoint, it's going to be the eastern Corn Belt and Missouri where the really big yields are. So that's where you would expect to have some issues with finding storage capacity," Good told Reuters. "Illinois would be one of them."