By TIM THORNBERRY
Kentucky Correspondent

LEXINGTON, Ky. — While grain producers ponder what to do next as prices continue to fall, a banner corn crop in Kentucky is all but harvested, prompting many farmers to consider storing it until prices go up.

Just last summer, corn prices peaked at around $7 a bushel. Since then, December futures have fallen to $3.80. There are many reasons for the decline, according to Cory Walters, University of Kentucky (UK) agricultural economist.

One is the size of the crop. Despite revised USDA estimates lowering the numbers of the harvest, the country is looking at the second largest yield in history. Bob Dickey, National Corn Growers Assoc. (NCGA) president, said this year’s crop shows the ability of producers to adapt to change.

“Our growers have overcome quite a few obstacles this growing season and demonstrated the resiliency of the American farmer,” he said. “We remain committed to bringing in a bountiful harvest to meet all needs – food, feed, fiber and fuel.”

Another reason for declining corn prices is fuel, or rather, the cost of energy. As the price of oil has dropped, bringing gas prices down, it has affected corn because so much of the crop is used for ethanol. Some states are now mandating the use of ethanol to help with emissions control. NCGA figures show about 20 percent, or 3 billion bushels, of the nation’s corn crop is being used for ethanol production.

The bad economy has had a hand in the decline as well, affecting corn and most other commodities. But, as farmers well know,
keeping a positive attitude and being prepared will go a long way.
“There is a chance prices could rebound,” Walters said. “I would not bet the entire crop on it, but at least some of it.”

It is that farming foresight that has paid off for producers wishing to store their crop awhile. Many have added storage bins over the last couple of years. In fact, UK extension agricultural engineer Sam McNeill said producers have added 10 million bushels of storage capacity since 2005.

“Some producers have been positioning themselves for this,” McNeill said. “On-farm storage capacity is more than double that of commercial storage in this state. We’re seeing more grain being held on farms now than there has been, even a couple of years ago.”

McNeill added it is important, when storing corn for an extended time, to keep it in good condition.

“It’s easier to store in cooler weather and farmers do this every year,” he said. “It is just a matter of how long they store it. It’s important to check for any hotspots that might develop and control those before they grow into worse problems.”

Commercial storage is an option in some areas, with the cost ranging from five to seven cents per bushel per month through the remainder of the year. McNeill said for those wishing to build storage on their properties, the cost will average about $1.75 per bushel to put up a grain bin.

If one prorates that over a 20-year period, which is average life for a bin, that would calculate to about 20 cents per bushel per year.

Maybe a tough year all around

While having options is good, most grain producers in the state will have tough decisions to make in the coming months. Already many wheat growers have decided to forego that crop for soybeans in the spring because of high input cost, but soybeans have seen a drop in price as well.

Allen May, an extension economist with South Dakota State University, commented in its “Soybean Market Review” that in less than four months, when the November 2008 soybean contract closed, the price had dropped to $8.58 per bushel in mid-October 2008 – a loss of $7.73 from the July high.

“The fact remains that soybean supplies from the 2008 crop are tight,” May wrote. “The recent adjustment by USDA in planted and harvested acres resulted in even tighter projected carryover supplies, meaning that we have very little wiggle room for a production problem in 2009.

If demand does not fall off significantly between now and the growing season next year, supplies will remain tight until harvest of 2009.

“These more traditional supply and demand factors still should provide a foundation for buyers and sellers, even though potential price rallies and price declines could be as pronounced as the price movement in the last year.”

He warned, however, that in the economy such as the country is enduring right now, “nothing is really that certain in terms of price outlook and predictability.”