Short crop, export slowdown could take pressure off river closure

(Illinois Farm Bureau file photo)

(Illinois Farm Bureau file photo)

By Daniel Grant

The planned closure of the Illinois River for maintenance work on six locks from July 1 to Sept. 30, 2020 may not have as much impact on crop movements and prices as feared.

But that’s not necessarily good news for farmers as it means they may not have as many bushels to merchandise in the upcoming year.

Mother Nature could ease much of the burden on the transportation system via short crops this season. If realized, the combination of short crops and trade issues could sap exports, which rely heavily on the barge system.

“This marketing year, I have a hard time seeing the river market being competitive,” Cole Stock, grain originator at Western Grain Marketing in Adair, said at the final of a series of river closure meetings hosted by Illinois Farm Bureau at the Peoria County Farm Bureau office.

Related: IFB members can watch a full recording of the presentations at MyIFB.org.

South American corn recently cost between 40 and 50 cents per bushel less than U.S. prices on the world market.

Curt Strubhar, of Advance Trading, believes U.S. corn exports could slip from 2.1 billion bushels in 2018-19 to 1.9 billion bushels in 2019-20.

“We don’t have a lot of exports on the books today. Exports are weak due to South American competition,” Strubar said at the IFB meeting. “The lower that (export estimate) goes, the less impact the Illinois River has on shipments and actual grain movements.”

Exports could also take a hit due to the possibility of a short crop. Stock believes prevented plant acres for corn could set a new record between 8 million and 12 million acres.

“We’re also looking for yields to be below trend this year,” Stock said.

But that shouldn’t hurt prices. Stock remains bullish on corn prices in the upper-$4 to $5 range in the year ahead due to tight supplies. If realized, higher corn prices should help support the soybean and wheat markets.

“Get your stuff booked at a profitable level ahead of the river shutdown,” he advised farmers who rely on the Illinois River market. “Be prepared for it.”

If soybean prices remain low at that point due to ongoing trade issues (China announced it intends to cease all purchases of U.S. ag products in response to another round of tariffs), farmers should prepare for the river shutdown by booking adequate storage. Those rates should remain relatively flat in central Illinois, according to Stock, who noted Western Grain Marketing plans no storage rate changes at country elevators next year for corn or beans.

Farmers, along with corn and soybean industry marketers, should also prepare for the river closure by booking trucking or rail in advance, as demand for those two modes of transportation could accelerate.

“There shouldn’t be as much of an Illinois River pull in terms of grain flow next year,” said Strubhar, who envisions an increase of Midwest corn shipments to the southeast. “Rail values likely will remain strong.”

Strubhar believes the river closure also could lead to tighter futures spreads and a slightly weaker basis in the impacted area next year.

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