As the harvest continues across southwest Minnesota, corn prices are on the rise because of to lower-that-expected yields and increased demand both at home and abroad.
With soybean harvests nearly 96 percent complete, farmers have turned to harvest their corn in the past week. Corn harvested jumped 30 percentage points from the previous week to 47 percent harvested, compared to 3 percent last year and 26 percent for the five-year average.
This week's USDA Crop Progress report shows that 68 percent corn harvest in the 18 top producing states has been harvested, which is more than 50 percent higher than last year and 29 percent higher than the five-year average.
The markets have been kind to farmers as corn prices have risen nearly 25 percent in the last two weeks. According to analyst John Sanow, corn prices have jumped from $4.54 per bushel to $5.88 per bushel in just 14 days. The cause, Sanow said, is "a short supply and a demand market."
Overall, yields across the corn belt have been less than expected. In the latest crop report released Oct. 8, estimates fell 496 million bushels from the previous weeks estimate. Determining actual corn yields is a guessing game, Sanow said, and nothing is certain until it starts coming out of the field.
"Its just part of the game," he said. "There was a lot of nitrogen leaching in the early part of the growing season which can cause production to be cut drastically. That's one reason I've been hearing for the lower estimates."
The lower-than-expected yields come at a time when demand is at its highest. The harvest is being stretched by ethanol production, livestock producers and increased exports to markets overseas.
"It all started when ethanol really started to take off," Sanow said. "That has been a driving force and every year we have had an increase in demand."
The shorter-than-expected supply and the growing demand sent prices sky-high. Farmers who have not contracted for all their corn, or who have unexpectedly large yields, could benefit from the higher costs.
"I know in our area yields have been phenomenal," Sanow said. "They have excess yields they weren't planning on, so it could be positive for them."
According to Scott Dubbelde, general manager at the Farmers Cooperative Elevator Co., yields have varied across southwest Minnesota. Some areas are reporting high yields while others are reporting less-than-expected yields.
"Yields are very variable to where there was too much water," he said. "If you could avoid the drown-out, the yield was good."
Looking beyond the region overall corn yields have been lower than expected. The lower crop and high demand is what drove the market up, Dubbelde said.
"Nobody is bigger than the market," he said. "The buyers and sellers make it happen. If you lower the supply and the demand pull is still there, it helps make your markets."
While high corn prices are good for crop farmers, it could mean bad news for livestock producers who rely on corn for feed. With exports and ethanol eating in the demand for corn, livestock producers could be left for higher feed costs - the most important grain used by meat producers.
"In the long term I suspect feed will be expensive," Sanow said.
Both Dubbelde and Sanow agree that the prices may not remain high. As farmers move to recoup costs and more of the harvest comes in, the markets could change drastically.
"Markets. It's a simple word, but it's very complicated." Dubbelde said. "At the end of the day it seems to find an equilibrium."