Ag Decision Maker features tool to help with corn storage
By KRISS NELSON
Now that it’s the second week of October, producers are growing ever more anxious about bringing their crops in out of the fields.
But at what cost?
Steve Johnson, Iowa State University farm management specialist, said cash flow restraints and lack of adequate on-farm storage are two reasons why farmers may choose to deliver corn at harvest above 15 percent moisture content.
Commercial storage requires that the corn be adjusted to 14 percent moisture to be placed under warehouse receipt. Rather than producers forced to take those discounts for delivery of corn above 15 percent moisture content, Johnson said they may want to consider letting their crop dry down naturally in the field before harvesting.
“Farmers forced to sell off of the combine should try to time harvest when corn approaches 15 percent to 16 percent moisture to avoid dry down and shrink costs,” he said.
For those producers not having to sell their bushels straight out of the field, but need to store it at the elevator due to lack of on-farm storage, Johnson suggests taking re-ownership of the crop via a basis contract.
“Might make more sense than placing these bushels under a warehouse receipt,” he said.
How long does it take for corn to dry down naturally?
According to ISU Extension research provided by Johnson, unharvested corn could dry at a rate of 0.3 points of moisture per day in wet, cool weather during the fall. Dry down improves to 1.0 points of moisture per day in hot, dry weather.
Although leaving corn to dry in the field reduces the cost of artificially drying the crop, Johnson said it may delay harvest and result in additional stalk lodging and potential ear loss.
If producers do choose to let Mother Nature dry the corn, Johnson advises to keep an eye on conditions of the corn plant.
“Monitor stalk quality in your fields and consider harvesting those portions of fields earlier where lodging or ear drop is likely,” he said.
How can producers calculate what those corn drying ad shrink costs are?
Johnson said ISU Extension has made available, on their Ag Decision Maker tool, a corn drying and shrink comparison for producers to plug in their own information and assumptions. It compares net revenue after storage costs and the breakeven selling price needed to pay storage costs.
Johnson said the five steps to using the “Corn Drying and Shrink Comparison, File A2-32” part of the Ag Decision Maker include:
- Variable cost estimate for on-farm drying: Choose a drying system and input your variable costs. Those are propane, electricity, drying time labor, drying capacity, average points of moisture removed per bushel, total bushels per year and total investment in drying system.
- Yield and moisture projections for unharvested corn: Input your own decisions regarding acres harvested, wet gross bushels yield, corn moisture in field, days before harvesting and expected cash grain price at harvest.
- Compare your grain sale alternatives at harvest: You can 1) Sell wet corn and incur a moisture discount; 2) Dry the grain commercially and then sell; 3) Dry it on-farm and sell it.
- Input your own final moisture level for commercial sale, moisture discount for wet corn sale, commercial drying charge and shrink factor. You might want to consider additional on-farm costs for drying and hauling.
- Input your own sales alternatives for after storage. This includes for the number of months grain will be stored, cash price paid after storage, moisture level for storage, minimum charge for commercial storage, base rate in months, monthly minimum charge commercial storage after minimum, quality deterioration on-farm storage, fans, electricity and labor on-farm storage and short-term interest rates.
Understand the market
With reasonable carry in the corn market (July corn futures minus December corn futures) many farmers see that as an incentive to hold these bushels, according to Johnson.
“I’d suggest understanding more than just futures carry,” he said. “This is especially true with the wider than normal harvest basis.”
After a farmer subtracts dry down/shrink to 14 percent moisture and places the corn under warehouse receipt then adds monthly storage costs at roughly 4 cents per bushel, they would usually have been better off selling the cash at harvest and paying down bills or using a basis contract and eliminating storage costs.
“Work with your merchandiser to thoroughly understand how a basis contract works and develop a marketing plan with time and price objectives for lifting the long corn futures position,” he said. “A basis contract eliminates storage costs and basis risk, but not futures price risk. The farmer doesn’t get to reflect the futures carry in this transaction.”
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