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"Still, significant quantities of corn will likely have to be
stored in temporary facilities, as has been the case in recent
years," said Darrel Good. Good's comments came as he reviewed
corn storage and the basis for corn. In late March, Good
discussed the generally weak basis for corn and suggested that
basis levels would remain weak until tighter supplies developed
at the farm level. That tightness has unfolded.
In late March, the average spot cash price of corn in central
Illinois was 42 cents under July 2007 futures. The basis was
about 10 cents weaker than the average basis of the previous two
years and about 20 cents weaker than the average of the previous
four years.
"The July basis had not strengthened since harvest of the
2006 crop," he noted. "On June 1, the average spot cash bid in
central Illinois was 9 1/2 cents under July 2007 futures, about
14 cents stronger than the previous two-year average, 7 cents
stronger than the four-year average and the strongest in four
years," he said.
"Basis strength began in mid-April and has occurred even
though the USDA's projection of year-ending corn stocks has
increased by 185 million bushels."
In addition, spot barge rates on the Illinois and Mississippi
rivers are about 30 percent higher than in late March,
suggesting that interior basis would be weak.
"The strengthening basis apparently reflects a combination of
the ongoing high rate of corn consumption and the slower rate of
farmer sales of old-crop corn," he said. "Increased ethanol
production capacity, a brisk rate of exports and positive
feeding margins in the livestock sector have all contributed to
the high rate of corn consumption."
The rate of farmer sales of old-crop corn initially slowed as
prices declined. The average spot cash price of corn in central
Illinois declined about 60 cents in the last week of March and
first week of April. The lower prices were followed by planting
delays in parts of the Midwest and uneasiness about potential
crop size even with the large increase in intended corn acreage.
"A slow rate of sales may persist until there is more
confidence about the size of the 2007 crop," Good noted.
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 Bids for harvest delivery continue to reflect a relatively weak
basis. The average central Illinois bid for fall delivery on June 1
was $3.49, 34 cents under December 2007 futures, about 5 1/2 cents
weaker than the average basis on that date for the past two years,
and about 9 cents weaker than the average of the previous four
years.
"To some extent, the weak new-crop basis reflects concerns about
adequate storage capacity during the fall harvest period," he said.
"Concerns about an unusually weak fall basis may be premature.
"If the 2007 crop is near the USDA's forecast of 12.46 billion
bushels and year-ending stocks are near 937 million bushels, the
total fall supply of corn will be near 13.4 billion bushels. That is
900 million bushels larger than the supply of last fall. However,
the basis was relatively strong last fall."
The potential supply of corn is only about 170 million bushels
larger than the record supply in the fall of 2005, Good added.
"About 390 million bushels of storage capacity was added in 2006,
and more is being built this year," he said. "In addition, the fall
supply of soybeans looks to be 280 million bushels smaller than the
supply at harvest time in 2006, and the supply of other grains --
sorghum, barley, oats and wheat -- may be only about 220 million
bushels larger.
"In total, grain storage capacity issues in the fall of 2007
should not be any more severe than in recent years."
Certainly, the severe storage problems that were associated with
Hurricane Katrina in 2005 are not expected this year, he noted.
Storage capacity issues, however, may develop in areas with large
increases in production.
"On a percentage basis, intentions were to expand corn acreage
significantly in Arkansas, Georgia, Louisiana, Mississippi and North
Dakota," he said. "In absolute terms, large acreage increases were
planned in Illinois, 1.6 million; Iowa, 1.3 million; North Dakota,
910,000; and Nebraska, 900,000.
"Some of the intended corn acreage in western areas may not have
been planted to corn due to more extensive delays in planting.
Conversely, acreage may have exceeded intentions in Illinois where
planting was fairly rapid. It appears, then, that storage issues may
be most acute in Illinois, depending on average yields and the
extent of new storage construction."
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental
Sciences]
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