USDA reported late Monday that 37% of the 2009 corn crop had been harvested, a 12 point jump in the past week, but still less than half of the five year average for this time of year. Many Cornbelt states made significant progress, including 12% in IL and NE, 23% in IN, and 16% in IA. Soybean harvest also progressed significantly, with 75% of the crop now in the bin, versus only 51% last week, but we are still behind the 92% average for the past five years. Early Tuesday (Nov. 10) USDA will release its November Crop Report, some of which may address quality issues because of the late maturing, somewhat moldy, and light test weight crop. But how will prices react as that crop comes to market?

The 2009 harvest is the slowest in recent history. While that has been a function of delayed maturity and record October rainfall, the quality of the crop is an issue of concern for Iowa State University farm management specialist Stephen Johnson. His October newsletter says damage from the freezing temperatures on immature corn may be worse than for other slow maturing crops. He says the comparative years in 1985, 1992, and 2004 all generated yields that exceeded the trend by at least 8%.

Johnson says the cool July enhanced pollination and the cool August prevented moisture stress during grain fill; and he says that is a recipe for a high yield. But the slow maturing crop was susceptible to freeze damage, something that was not the case in the other years. Thus immature corn will have a less dense kernel and subsequently, lower test weight, which could be down to 45 pounds per bushel. That is far below the 56 pounds for #1 corn or 54 pounds for #2 corn. Additionally, he said high moisture levels lower test weight and only serve to raise drying costs and shrink loss.

So where will low test weight and potentially moldy corn go to market? Johnson says much of the lower quality corn will become livestock feed and that will compete with wheat for feed use near feed lots. But he says it is hard to predict whether the light weight corn will be bearish or bullish on cash prices. On the surface, says Johnson, low quality corn does not store well, and will find its way to the market quicker than higher quality corn. Thus, cash prices could be under pressure this winter as the low quality corn is marketed.

Johnson says the processing industry will carefully scrutinize what they are receiving, and will be tough on grading the corn. He says that is where the corn germ is extracted and heat damage from high temperature drying will impact the area where the corn oil is located.
Gross revenue and profitability are also questions raised by Johnson because most farm budgets were not prepared for high costs of drying and shrink, as well as lower market prices because of quality discounts. He says yields still appear large for most of the Cornbelt, the discounts will deter many farmers from being too quick to harvest if there is going to be high drying charges. Johnson says the quality issue will be resolved in the cash market via basis adjustments, as well as higher standards for quality when loads are found with excessive amounts of moldy corn. If that is the case, Johnson urges farmers to keep in communication with lenders, input suppliers, and grain merchandisers.

Summary:
Significant progress was made toward harvest in the past week, but projections will soon be addressing the size of the crop in the wake of quality deterioration. Farmers with corn of lower quality may be shipping that to livestock feeding facilities, due to expected discounts at processing plants. The lower quality grain will be coming to the market first, and basis levels will be reflecting the lower quality.