Demand from overseas helps Iowa farmers after derecho

 

 

Hurricane-strength winds that swept portions of the state Aug. 10 left ruined crops and destroyed storage bins in its wake. But Iowa farmers and cooperatives are coping, with some help from big overseas sales.

“It’s not that we haven’t dealt with storms before, and it’s not that we haven’t dealt with winds before,” Iowa Agriculture Secretary Mike Naig said this week.

“It’s just the scale of it. When you can drive from Carroll County to Clinton County and just see downed corn the whole way, that’s something we have not seen before.”

A week of unseasonably warm weather pushed Iowa’s corn harvest to 94 percent of completion, according to the U.S. Department of Agriculture’s Nov. 9 crop report.

 

Only about 2 percent of the soybean crop still was in the fields. Both figures take into account crop lost to derecho.

“It’s a devastating thing that happened, but we’re going to get though it fine,” said Dave Holm, executive director of the Iowa Institute for Cooperatives.

“The timing of this was really poor, so it’s going to take some time,” said Ron Woeste, general manager of Linn Co-op.

The Marion-based cooperative lost about half its storage capacity — 280,000 bushels’ worth in three bins at Springville.

“We’ve had to transition down to one (crop) dump and try to haul as much to the processors as we can,” Woeste said.

“We’ve been losing a little bit of time,” said Bill Chizek, safety director for Heartland Co-op. Heartland lost 2.5 million bushels of storage when five bins at Malcolm collapsed.

“We didn’t shut any location down,” Chizek said. “We were able to take all the grain that we should.”

River Valley Cooperative lost 1.7 million bushels of soybean storage at Martelle, Stanwood and Clarence, according to Mike Moellenbeck, vice president of its grain business unit.

That meant longer hauls for crops that otherwise would have gone to those locations.

“We were challenged finding homes for beans at those spots,” Moellenbeck said. “We got beans in and we tried to haul them out (of fields) ourselves.

“The logistics aren’t always great. It seems like you receive it faster than you sell it.”

But farmers and the cooperatives also caught something of a break: Powered by foreign sales, grain prices have trended upward since August, making it easier to find a “home” for the displaced crop.

And the crop lost to the storm takes some pressure off the reduced storage capacity.

“When you’re looking at the loss in storage capacity, they were sort of matched by the losses in crop,” said Chad Hart, associate professor of economics at Iowa State University and an Extension economist.

“We’re still going to have some issues regionally, but when you look at those burst bins, the crop itself took something of a hit, too.”

 

 

The Iowa Department of Agriculture and Land Stewardship estimated up to 850,000 acres of corn and soybeans will be written off at harvest’s end.

Hart figured the state harvest will be down about 250 million bushels of corn and 300 million bushels of soybeans from early estimates.

“Before the derecho, we were staring at nationwide a record corn crop,” Hart said. “The bean crop was looking real good as well.

“The derecho took out some of that. The drought that has been lurking in the background for a lot of folks, that took out some of that.”

“It’s a dynamic situation,” Naig said. “You may have the final accounting will come at the end, when we get a full picture from the crop insurance claims and from the acres that were harvested.”

‘We got pretty lucky’

Whatever the final numbers, the derecho forced farmer-owned cooperatives to improvise harvest and marketing strategies to counter lost storage.

Naig estimated 60 million bushels of storage were lost at Iowa elevators and a similar number in bins on the farm.

“It’s created hardship for those commercial warehouses that lost storage,” he said. “Farmers who lost their own storage may have had to look at some different marketing. That has created some additional costs.”

Which is where a surge in export demand comes in.

“We got pretty lucky,” said Woeste. “The grain prices peaked up and, instead of storing grain, they’ve been selling to the processors.”

“China’s leading the way,” Hart said. “Over the last three or four months they have been the largest customer by far.

“They have never been that strong in corn, and right now they’re our largest customer. Two years ago they wouldn’t even let our beef in. Right now they’re our No. 4 customer.”

 
 

 

Big orders also have come from Latin America and Southeast Asia, prompted by new trade agreements and an outbreak of swine flu that forced suppliers in other nations to cull herds.

“That creates a massive protein hole worldwide, and right now U.S. pork and U.S. beef are helping to fill that void,” Hart said.

That in turn pushes demand for feed grains.

“We’ve seen a nice run up in prices,” Naig noted. “Demand is strong, and we’ve seen China make significant, historic levels of purchases. Not just orders, but taking shipments.”

That’s led to a reversal in typical harvest-season marketing strategy.

“This is one of those weird years,” Hart said.

“Usually I tell people hold onto your crops because this is when prices are usually the lowest. In this case, yeah we’re in harvest but there are some good prices out there you can grab.”

It’s also helped Iowa’s farm economy weather the year’s other big uncertainty.

“Right now, agriculture is for the most part back to pre-COVID conditions,” Hart said.

“Demand is pretty good. Supply was somewhat affected, but they roared right back.”

 
 
 

 

About 95 percent of Iowa farmers carry crop insurance, but the derecho will mean some unanticipated costs.

“It doesn’t make you whole, but it does allow you to farm next year,” Naig said. “There are some uninsured losses. There’s the extra cost of trying to harvest downed corn, there’s the extra cost of having to transport grain and market it.”

Storage facilities also are insured, but as many homeowners learned after the derecho, there’s almost always something that’s not covered.

“They all had what we thought was adequate insurance, but you don’t buy insurance to lose half your locations,” Holm of the Iowa Institute for Cooperatives said.

“The loss of revenue insurance is probably going to be the biggest gap.”

Cooperatives may see a storage crunch next year as lost acres return to production while rebuilding continues.

“It’s at least a two-year project,” said Moellenbeck of Martelle, Stanwood and Clarence. “There’s just no way we’re going to rebuild all of that to fix the needs that are out there” in one year.

 

 

Woeste said Linn Co-op plans to rebuild its damaged facilities, but some cooperatives may restructure operations for more efficiency.

“A lot of temporary storage was constructed,” Holm said. “Now we’re looking at replacing that storage. It was also an opportunity for us to say, ‘Now we’re going to start from scratch. What do we want that to look like?’”

“They continue to find issues even today from the derecho,” Hart said. “It was a bad disaster, but it’s also an opportunity to redo some things that probably needed adjustment anyway.”