Chicago: 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 US 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 US sent prices soaring. The shrinking supply forced big import-ers 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.
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 US farmers will likely be producing more grain for less money. The USDA forecasts net farm income will fall 8.7 per cent this year to $62.3 billion — the lowest level since 2009.
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. Storing grain gives farmers more control over when and how they sell, to avoid low harvest-time pri-ces and to best take advantage of spikes in futures or currency swings. 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 US 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.
