CORN QUALITY WEIGHING IN ON HARVEST OUTCOMES
Dec 17, 2019
Unfortunately, the impacts of the shortened growing season and less than ideal conditions throughout 2019 are continuing to reflect on corn harvest. While many producers are grateful to be wrapping up harvest, the results at the elevator are matching the unfavorable production year with low test weights, high broken corn and foreign material prevalent.
Senior Vice President of Grain Marketing and Rail Logistics Jason Klootwyk provided insight on the factors revolving around this issue: “The lack of a sufficient growing season prevented the corn from reaching proper maturity. The lack of maturity has resulted in a kernel that is lightweight and brittle. Low test weights and high broken corn and foreign material are prevalent in the grain we are receiving from customers. While most in the industry were aware this was a possibility, few could have predicted how large the problem has become.”
The average 55 lb. corn test weight in early harvest declined to 52.5 lb. in late November. With the increasing deterioration prevalence of corn quality in North Dakota and South Dakota corn harvests, Agtegra released a corn discount schedule that took effect November 26. With an overwhelming amount of lightweight corn, the market struggles to place such crops. In order to sell the crop as #3 or #4 yellow, Agtegra receives a discount, as the current incoming corn quality does not allow the cooperative to meet #2 yellow specifications. Therefore, a discount schedule enables both Agtegra and producers to sell the crop.
A discount schedule for grain not meeting minimum specifications enables the seller an opportunity to still sell grain rather than being faced with complete rejection. This schedule has been designed to represent the marketplace risk for a buyer assuming responsibility for handling a product that is below minimum standards. Even with such schedules, extremely poor quality corn is still present, at which no discount can assume risk. Grain companies are struggling to come up with a solution to place such grain. Premiums for higher test weights are starting to emerge, but the market is not mature enough to determine at this time if paying premiums is sustainable.
Agtegra has made several sales to end users that will accept corn as low as 52.5 lb. test weight in addition to two end user sales that even accepted 51.5 lb. test weight. Regardless, these sales proved significantly discounted in comparison to the regular market. However, to accommodate to the region and the negative effects of this past growing season, the cooperative is continuing to explore sales opportunities for test weights at or below 50.0 lbs.
Klootwyk notes that the future outlook on this market is expected to settle, with quality issues eventually finding solutions in the marketplace after initial struggles in a similar pattern this year: “The market is aggressively working on solutions for the poor quality. End users are becoming more aware of the opportunities that exists and are more accepting of corn that is of poorer quality. Additionally, the railroads are aware that grain is going to have to potentially move in non-traditional ways to help find a home, and they have expressed that they are open to that.”
While the quality has negatively affected the ability of producers’ to meet corn test weight specifications this
year, solutions are on the horizon.
“The biggest thing is to maintain communication with our origination and commercial teams so we can try to help solve problems when they arise,” Klootwyk adds. “Things are evolving quickly, and often what is a major problem today will have a solution tomorrow. Many of our customers feel like their challenges are theirs alone, and that’s not true. Most of our team here either farms or comes from a farm background, so we fully understand the challenges our customers are facing. Communication on harvest progress, timing, quality concerns and on-farm capacity help us at Agtegra better understand the issues and help formulate solutions.”
Senior Vice President of Grain Marketing and Rail Logistics Jason Klootwyk provided insight on the factors revolving around this issue: “The lack of a sufficient growing season prevented the corn from reaching proper maturity. The lack of maturity has resulted in a kernel that is lightweight and brittle. Low test weights and high broken corn and foreign material are prevalent in the grain we are receiving from customers. While most in the industry were aware this was a possibility, few could have predicted how large the problem has become.”
The average 55 lb. corn test weight in early harvest declined to 52.5 lb. in late November. With the increasing deterioration prevalence of corn quality in North Dakota and South Dakota corn harvests, Agtegra released a corn discount schedule that took effect November 26. With an overwhelming amount of lightweight corn, the market struggles to place such crops. In order to sell the crop as #3 or #4 yellow, Agtegra receives a discount, as the current incoming corn quality does not allow the cooperative to meet #2 yellow specifications. Therefore, a discount schedule enables both Agtegra and producers to sell the crop.
A discount schedule for grain not meeting minimum specifications enables the seller an opportunity to still sell grain rather than being faced with complete rejection. This schedule has been designed to represent the marketplace risk for a buyer assuming responsibility for handling a product that is below minimum standards. Even with such schedules, extremely poor quality corn is still present, at which no discount can assume risk. Grain companies are struggling to come up with a solution to place such grain. Premiums for higher test weights are starting to emerge, but the market is not mature enough to determine at this time if paying premiums is sustainable.
Agtegra has made several sales to end users that will accept corn as low as 52.5 lb. test weight in addition to two end user sales that even accepted 51.5 lb. test weight. Regardless, these sales proved significantly discounted in comparison to the regular market. However, to accommodate to the region and the negative effects of this past growing season, the cooperative is continuing to explore sales opportunities for test weights at or below 50.0 lbs.
Klootwyk notes that the future outlook on this market is expected to settle, with quality issues eventually finding solutions in the marketplace after initial struggles in a similar pattern this year: “The market is aggressively working on solutions for the poor quality. End users are becoming more aware of the opportunities that exists and are more accepting of corn that is of poorer quality. Additionally, the railroads are aware that grain is going to have to potentially move in non-traditional ways to help find a home, and they have expressed that they are open to that.”
While the quality has negatively affected the ability of producers’ to meet corn test weight specifications this
year, solutions are on the horizon.
“The biggest thing is to maintain communication with our origination and commercial teams so we can try to help solve problems when they arise,” Klootwyk adds. “Things are evolving quickly, and often what is a major problem today will have a solution tomorrow. Many of our customers feel like their challenges are theirs alone, and that’s not true. Most of our team here either farms or comes from a farm background, so we fully understand the challenges our customers are facing. Communication on harvest progress, timing, quality concerns and on-farm capacity help us at Agtegra better understand the issues and help formulate solutions.”