Midwest corn harvests are about a month behind the typical season and expected corn yields are lower than last year. Meanwhile, in the southern United States, the corn harvest is business as usual for farmers.
The FreightWaves’ SONAR chart below shows the increase in digital, or online, interest in corn production (SIGNAL.CORNPRODUCTION). In September, there were raised concerns about a slow and late harvest season, with corn harvested being down from the previous year. Much of the discussions were a reaction to the U.S. Department of Agriculture (USDA) monthly outlook for corn.
A rainy spring, which caused flooding in the Midwest, delayed farmers from planting corn for this year’s harvest. As such, corn crops are not ready to be harvested, and companies that rely on corn are turning toward Brazil to import corn as demand is increasing. One ship bringing corn arrived in early September, with another ship carrying corn expected to dock Oct. 17.
According to the USDA’s monthly corn outlook, production is expected to be lower than last year, but corn exports and corn consumed for ethanol is also expected to be lower for the 2019-20 harvest season. Decreasing consumption for this season is expected to outpace the decline in production, which will likely cause an increase in corn inventory in storage (CORNIV.USA).
SONAR: CORNPC.USA, CORNIV.USA
The average price for a bushel of corn received by producers (CORNPC.USA) will return to the same level as the baseline set by the USDA. Prices received are higher when it is the offseason. As the harvest continues, the prices will remain close to the baseline.
Large amounts of corn and corn products are moved by rail, so the decline in production will likely result in reduced carloads year-over-year. According to the Association of American Railroads (AAR), 65% of grain produced in the U.S. is corn. Approximately 70% of corn is moved by truck over a short distance to be made into ethanol. Barge accounts for about 10% of U.S. corn movement — typically to stage corn for exportation, and rail movement takes the last 20% of corn.
On average, 49% of grain moved by rail (RTOGR.USA) is corn. Decreased and lagged production of corn impacted grain carloads in the beginning of September. In comparison to the previous year, there is a clear lag in harvest time, and the lower productivity will likely keep carload volumes below 2018 levels.
When the harvest season ends, corn moved into storage then gets used, causing prices to increase as supply decreases. As such, as costs get too high, consumers search for cheaper alternatives. Since the current harvest season has lagged, higher prices have dragged out, such that large consumers imported corn at a lower cost than pulling more corn out of storage. Corn consumption, in addition to production, is projected to be lower than last year, which means that there will not be a shortage of corn in the U.S.