U.S. farmers who have been holding out for higher prices for their corn may finally sell their grain below target levels in the next few weeks as a government report released on Friday underscores the huge supplies left in storage bins around the country, analysts said. The U.S. Agriculture Department said that farmers still had 2.841 billion bushels of corn in their storage bins as of June 1, the fifth most ever for that time period. It was the highest June 1 on-farm corn storage recording in 29 years and an indication that the market could remain under pressure until harvest.
Total corn stocks as of June 1 stood at 5.225 billion bushels, the third biggest ever for the period and the most in 30 years.
The large stocks persisted even though farmers moved 2.067 billion bushels of corn out of their storage bins between March and June, according to the USDA. It was the third-largest removal of stocks for the period on record.
The massive supplies have hung over the market since last autumn's harvest and allowed grain dealers to keep their basis bids weak. The market weakness is likely to persist as dealers expect the Midwest to be flush with grain again once farmers start rolling their combines.
Farmers who have been waiting for rally will need to clear out storage bins to make room, regardless of price, said Brian Hoops, analyst at Midwest Market Solutions.
"There is a lot of farmer selling we have to see," he said "Fourth of July is the dividing time – if they don't get a weather rally, they will have to dump their product. They don't want to but the market is telling them they have to."
Farmers have pointed to $4-per-bushel of corn as their break even level, but the Chicago Board of Trade most-actively traded corn futures contract has traded below that point for the past year. Most cash bids for corn were posted lower than futures market prices.
Corn futures fell 0.5 percent between March and June, and the $3.83 high hit during the quarter was the lowest spring peak since 2006, leaving them with few opportunities to lock in a profit.
But prices rose 1.2 percent during June, which may have prompted some sales that did not show up in the government data.
"We have to remember this is a June 1 report," Price Futures Group analyst Jack Scoville said. "I think (stocks) are already down, and I think a lot of the on-farm is in the process of moving right now."