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Grain marketing slows down due to prices, weather

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By Jonathan Eisenthal

Observers have tracked a slow down below the typically slow movement of grain in January and February this year.

“There’s no doubt that’s going on,” said Ed Usset about a recent trend of farmers holding onto more of their grain than usual after the 2013 harvest. Usset is a professor at the University of Minnesota and an expert in grain marketing.

“There’s some denial going on. We have come off of a couple of really good years. We are only about four months into this lower price regime. Prices have been steady as can be, four-dollar corn, give or take 15 cents. There’ll be a rally, up to $4.15, or $4.20 — southern Minnesota prices –occasionally it’ll go back to $3.90, $3.85. The problem is four-dollar corn doesn’t pay the bills. It doesn’t pay them like it did five years ago.”

In the last five years, bear moves have been short lived, Usset observed, leading some farmers to hope that the current market will find its feet again in the near term. But Usset warns this could be overly optimistic thinking. Some analysts predict persistent lower prices for the next several growing seasons. He said there have been three extended periods of lower corn prices since 1975, according to his analysis of USDA figures.

“There are people looking at new crop corn and they see it going fifty cents or a dollar lower,” Usset said. “I’m not saying they’re right, and I’m not hoping they are, but if we get a decent number of acres and good weather there’s no doubt prices could move lower.”

So, he advised looking for a graceful exit, and ultimately making sure to clear out the bin by June, in order to avoid the possibility of having to market grain at much lower prices.

“The weather has been a big factor in the slow movement of corn,” said Bruce Peterson, who farms in Northfield and serves as Vice President of Minnesota Corn Growers Association. “Once things warm up, and it looks like we’re getting a thaw this coming week, I think we’ll see grain start to move. Especially when the river opens up — the river terminals have gotten to be pretty competitive in their pricing — we should see grain sales come back up to normal levels.”

Chuck DeGrote, who farms near Clara City in west central Minnesota, agreed that the weather combined with low prices have slowed the movement of grain.

“It’s just no fun to start some of these trucks when its 15-below and you’ve got drifting snow so you have to keep clearing out your path,” DeGrote said. “And the pricing doesn’t give you much of an incentive to do all that.

“January can be a slow month, February tends to see an increase in activity. With the harder winter that we’ve had, there’s probably a wait and see attitude among many farmers. I would imagine as time rolls on, and some of this crop is pent up, we’ll see some rallies this spring that could draw more grain into the market. In the meantime, demand is holding up pretty well. Ethanol plants are running at maximum output and the livestock prices are pretty good, so that should help. Prices should be more attractive to export markets than last year, so that will help things out, too.”

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