In US, huge grain crops spell headache for farmers

US corn and soybean crops could break records this year, but for farmers the bounty has a dark side: falling prices and a logistics nightmare getting crops to market.
"It is not an exact science but when we look at the fields, it looks like it is going to be a big crop,"  said John Reifsteck, a corn and soybean farmer in Champaign, Illinois, a Midwest farm belt state.
Reifsteck estimated his corn crop could be as much as 15 percent higher than last year's.
The US Department of Agriculture is forecasting record crops this year for corn and soybeans, the two largest US crops in terms of production. Unless there is a devastating freeze or torrential rains before the harvest ends, corn production is projected at 366 million tonnes and soybeans at 106.5 million tonnes.
Handling all this production will be complicated. According to Arthur Neal, a USDA transportation and marketing official, about 3.5 percent of the crops, equivalent to 762,600 truck loads, cannot be kept in permanent storage structures like silos -- the highest share since 2010.
That does not bother Reifsteck, who says he will rely largely on field storage. "Hopefully most of it will get picked up and shipped during the fall or winter. With rains there will be some spoilage but if you lose a few bushels now, it is OK," he said.
What bothers him more is transportation.
"It is harder than a few years ago to find and keep truck drivers with proper records. We may have to use two or three more weeks to harvest," he said.
Rail problems also have affected grain shippers, especially in several northern states on the Canadian border.
An exceptionally severe winter snarled transportation, and the growing volume of shale oil produced in North Dakota being transported by train has weighed on freight service to grain shippers.
Since October 2013, the rail freight service for grain "has been inadequate, characterized by long delays, missed shipments, burgeoning backlogs, and higher costs," Neal told a Senate hearing earlier in September.
- Farm income hit -
Once all these logistics challenges are dealt with, US farmers face another problem: a drop in revenues.
With the prospect of abundant harvests, buyers have pushed prices into a freefall. The corn futures contract recently slid below $3.50 a barrel on the Chicago Board of Trade, well below the $8 level it fetched in 2012, a year when crops were stressed by drought.
For all US farmers, the USDA is forecasting about a 14 percent drop in farm-related income in the government's current fiscal year that ends September 30.
But Reifsteck takes the long view. "Farming is not one year at a time," he said. After two exceptionally lucrative years, US farmers have socked away savings.
What is painful for farmers in the pocket -- falling grain prices -- has proved a boon for ranchers, lowering the costs of feeding their animals.
But the price declines will not show up quickly in stores, warned Scott Irwin, an economist and professor at the University of Illinois.
"It will take some time, one or two years, to feed through to meat and egg prices in groceries, which are the most direct connection to the farm. But we will get some impact because the prices have gone so high," he said.
For processed products like breakfast cereals, he said, the effect will be "relatively modest" because less than 20 percent of the cost is due to the raw commodity cost.