Analysis: Grains piled on runways, parking lots, fields amid global glut

Adecoagro

11/04/2017 12:00

(Repeats for additional clients with no changes to text) 
    By P.J. Huffstutter and Karl Plume 
    CHICAGO, April 11 (Reuters) - Iowa farmer Karl Fox is 
drowning in corn. 
    Reluctant to sell his harvest at today's rock-bottom prices, 
he has stuffed storage bins at his property full and left more 
corn piled on the ground, covered with a tarp.  
    He would rather risk potential crop damage from the elements 
than pay the exorbitant cost of storage elsewhere. 
    "That's how poor people do it," said Fox, who has been 
farming for 28 years. "You do what you have to do." 
    Farmers face similar problems across the globe. World 
stockpiles of corn and wheat are at record highs. From Iowa to 
China, years of bumper crops and low prices have overwhelmed 
storage capacity for basic foodstuffs. 
    Global stocks of corn, wheat, rice and soybeans combined 
will hit a record 671.1 million tonnes going into the next 
harvest - the third straight year of historically high surplus, 
according to the U.S. Department of Agriculture (USDA). That's 
enough to cover demand from China for about a year. 
    In the United States, farmers facing a fourth straight year 
of declining incomes and rising debts are hanging on to grain in 
the hope of higher prices later. They may be waiting a long 
time: Market fundamentals appear to be weakening as the world's 
top grain producers ponder what to do with so much food. 
    The persistent glut is a striking contrast from the panic a 
decade ago, when severe droughts in Russia and the United States 
sent prices soaring. The shrinking supply forced big importers 
such as China to enact policies to encourage more domestic 
production and increase the volume of storage to improve food 
security. 
    China abandoned that policy last year and is now selling off 
hundreds of millions of tonnes of old stocks.  urn:newsml:reuters.com:*:nL3N17114R 
    Russia, too, is looking at exporting from state-held 
stockpiles, with storage stuffed after a record harvest in 2016. 
    A surge of Chinese and Russian exports would put even more 
downward pressure on prices in an oversupplied global market. 
    That means U.S. farmers will likely be producing more grain 
for less money. The USDA forecasts net farm income will fall 8.7 
percent this year to $62.3 billion - the lowest level since 
2009. 
     
    CATERPILLARS, RODENTS AND DONKEYS 
    In farms across Iowa, corn bulges in plastic tubes that 
snake across the fields.  
    The grain-stuffed silo bags are taller than a man, often 
longer than a soccer field and look like monstrous white 
caterpillars. 
    On the other side of the globe in Australia, demand for the 
storage bags has exploded after farmers produced record crops of 
wheat and barley. 
    They are laying across fields in Argentina, too. There, 
wheat production spiked 41.6 percent this year over the 2015/16 
season, according to the most recent USDA data. 
    There are risks to using the bags, however, as wild animals 
ranging from rodents to armadillos and even donkeys can be 
tempted to break in for the grain, said Mariano Bosch, the head 
of Adecoagro SA  AGRO.K , which farms more than 225,000 hectares 
of row crops in Argentina, Brazil and Uruguay. 
    When the company expanded its grain plantings in northern 
Argentina, he said, they started building electrified fences 
around their silo bags to keep out cougars and pumas. 
    "They won't eat the grain. They're just curious," said 
Bosch, who added that about 40 percent of the company's grain 
this year is stored in silo bags. 
    In neighboring Brazil, the world's largest soybean shipper 
and the second-largest exporter of corn, towering grain silos 
have sprung up all across the country. 
     
    GRAINS ON THE RUNWAY 
    Storing grain gives farmers more control over when and how 
they sell, to avoid low harvest-time prices and to best take 
advantage of spikes in futures or currency swings. 
    But with storage running short - and a mountain of grain to 
move ahead of summer or early autumn harvests - that control is 
slipping away.  
    Farmers with mounting bills, tight cash-flow and nowhere to 
store crops may have to sell them - even if it means taking a 
loss. 
    In Goodland, Kansas, where the next wheat harvest begins in 
late June, farmers holding grain in silos are facing cash wheat 
prices of about $3.15 a bushel and cash corn prices of $2.90 a 
bushel - both well below production costs of at least $4 a 
bushel.  CORNSCUGDL-C1   WHRWFAGGDL-C1  
    Permanent storage in the United States can handle about 24.3 
billion bushels - well short of the 25.9 billion bushels of 
wheat, soybeans and feed grains the USDA said was piled up by 
the end of last autumn's harvest. 
    The overflow in the United States has prompted a rush for 
temporary storage. The USDA has approved permits for more than 
1.2 billion bushels of temporary and emergency grain storage - 
such as tarp-covered piles and open-air mounds. That's a record 
amount, according to the USDA. 
    In Kansas, some grain owners are renting airport tarmacs 
from decommissioned military bases, empty farm fields and 
parking lots to stash their corn as the situation becomes acute, 
according to farmers and local, state and federal officials. 
    Meanwhile, there are no signs of a slowdown in grain 
production. 
    The USDA already expects 2016/17 global harvests to be the 
highest since its records started in 1960/61 at 340.79 million 
tonnes of soybeans, 1.049 billion tonnes of corn and 751.07 
million tonnes of wheat. 
    "Nobody is going to cut back," said Fox, the Iowa farmer. 
    With spring planting coming up, he is scouting for more 
storage space for this year's harvest. 
    "I have a note at the bank to pay off," he said. "I can't do 
less." 
 
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GRAPHIC - U.S. grain storage capacity    http://tmsnrt.rs/2mMPpN9 
EXCLUSIVE- Russia considers exporting part of state grain 
stockpile     urn:newsml:reuters.com:*:nL5N1GF2E9 
China to end state corn stockpiling, free up prices    
 urn:newsml:reuters.com:*:nL3N17114R 
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> 
 (Additional reporting by Tom Polansek and Mark Weinraub in 
Chicago, Hugh Bronstein in Buenos Aires, Gustavo Bonato in Sao 
Paulo, Rajendra Jadhav in Mumbai, Naveen Thukral in Singapore 
and Polina Devitt in Moscow; Editing by Simon Webb and Brian 
Thevenot) 
 ((jo.winterbottom@thomsonreuters.com; +13124088132; Reuters 
Messaging: jo.winterbottom.reuters.com@reuters.net)) 
 
Keywords: USA GRAINS/STORAGE (ANALYSIS, PIX, GRAPHIC, REPEAT