By Jeff Wilson

BridgeNews

KANSAS CITY (B)--A shortage of grain storage space is commonly thought to be looming in the Midwest this fall as record U.S. corn and soybean crops are harvested and large carryover stocks remain in storage. But there are signs that the storage crunch may prove much less severe than some are expecting. The biggest storage problems will remain in Illinois, Iowa and Indiana.

Increased storage capacity constructed in the past few years will be one element preventing massive shortages. Storage capacity growth may be larger than some have perceived, analysts said. Signs that the corn and soybean crops will not be as large as expected also could help out.

In addition, the commercial trade and farmers have been dealing with rising surpluses for three years and appear better prepared to handle the harvest glut.

"We have a saying in our office that a problem perceived is seldom realized," said Curt Strubhar, an analyst for Advance Trading Inc. in Bloomington, IL.

His firm estimates that the total U.S. grain storage deficit will amount to about 232 million bushels based on Aug. 11 U.S. Department of Agriculture crop forecasts and expectations for Sept. 1 grain stocks in all positions.

But he noted that based on the smaller July 1 USDA forecasts, the firm had been looking at excess storage capacity of 175 million bushels.

Thus, a drop in crop size from the latest USDA forecast could quickly diminish the storage crunch this fall--at least on paper.

Strubhar emphasized that the firm still was looking for storage deficits and weak basis to remain a problem in the corn belt, especially Illinois and Indiana, where production is up significantly from a year ago. But the worst case scenarios don't appear to be in the cards.

"Grain will need to move this fall but it may not be the big wall of supplies some people are forecasting," he added.

Strubhar said a survey of clients showed increased development of both temporary and permanent storage bins in 2000 than occurred in 1999.

Although admitting the survey of clients may be unscientific, it showed a 10.2% increase in the growth of Illinois grain bin storage units this year and a 5.8% increase in Iowa storage space growth.

Just in time for Illinois, where the corn crop is forecast to be 1.746 billion bushels, up 17% from 1999, and the soybean crop is slated to be 11% larger.

Joel Karlin, analyst with Ag Financial Strategies in Fayetteville, NY, sees plenty of storage in the western corn belt, but still deficit storage problems in the east.

Karlin did a survey of storage space in seven key Midwestern states: Illinois, Indiana, Iowa, Ohio, Kansas, Minnesota and Nebraska.

Based on anticipated Sept. 1 grain stocks and USDA's August production forecasts, he is forecasting a storage deficit of 275.2 million bushels in those seven states.

Indiana faces the greatest storage problem with a stocks-to-storage deficit of 24.5%, or 245.4 million bushels. Illinois will be looking at a 10% storage deficit this year, or about 230 million bushels.

In Iowa the deficit falls to 6.0%, or 165 million bushels, and Ohio faces a storage shortfall of 2.3%, or 18.2 million.

By contrast, Kansas is looking at a potential surplus of 217.2 million bushels, with Minnesota potentially holding a surplus of 36.3 million and Nebraska a surplus of 130.5 million.

Recently, Allendale Inc. of McHenry, IL, released results of its survey of available storage space in the seven primary producing states of the Midwest and it indicated 1.259 billion bushels of deficit storage space this fall.

Other analysts agree that the storage issue may be old news given the weak cash basis in the past several months across the production belt.

"The surplus always seems to disappear someplace," said Sid Love, grain analyst at Kropf and Love Consulting in Kansas City.

His bigger concern in the corn market moving into the harvest season is the new delivery process on the Illinois River system.

"We are likely to see constant deliveries all fall," he warned. "The deliveries against corn futures are not likely to give the corn market a chance to breathe."

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