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Cash-rich U.S. farmers slow to sell huge corn, soybean crops

CHICAGO -- Several years of profitable crops have left U.S. farmers with enough cash that they can delay additional sales of corn and soybeans, which could be bad news for food companies, livestock feeders, and exporters hoping for an abundance of low-price grain after this year's harvest.

While the U.S. Agriculture Department has forecast huge corn and soybean crops this autumn, these rich farmers have enough on-farm grain storage to hold onto much of their bounty until prices move higher.

"The American farmer has never been in a better or stronger financial position ever in the history of farming," said Tom Grisafi, president of agricultural advisory service Trade The Farm LLC. "They have a ton of money and they have more on site storage than ever."

One indicator that post-harvest selling may be slow is the decline in pre-harvest business. Farmers often sell a portion of their crops months before firing up their harvesters, but this year that selling has been slow.

"What you are looking at is the historically small amount of grain that the producer has sold," said Joe Christopher, a grain merchandiser at Crossroads Co-Op in Sidney, Neb., referring to deals for corn and soybeans that will be harvested in the fall.

Commercial purchases of grain from the upcoming harvest are running about 20 percent of normal for this time of year, said Christopher.

"There is a wealth factor that is in play," he said. "They have had three or four years of very good returns. They are probably as well financially fixed as they have ever been."

While last year's drought, the worst in the United States since the 1930s, cut yields, it also pushed crop prices to record high levels. So those lucky farmers who harvested a crop then were paid handsomely for it.

Even this year farmers should do well. USDA on Tuesday forecast net farm income for 2013 at $120.6 billion, up 6 percent from a year ago and the second highest of the last 40 years, when adjusted for inflation.

USDA's latest harvest forecast calls for a U.S. corn crop of 13.763 billion bushels, up 28 percent from the 2012 harvest, and a soybean crop of 3.255 billion bushels, up 8 percent from 2012.

Late crops delayed selling

Lengthy planting delays in the spring pushed U.S. Midwest corn and soybean development well behind normal. That relative immaturity left growers less confident than usual about the eventual size of their crops and contributed to their reluctance to commit to pre-harvest sales.

"I am not sure exactly what we are going to have out there," said Andrew Goleman, a farmer in Divernon, Illinois.

Goleman said he has only committed to sell about 5 percent of his expected harvest. In a typical growing season, he usually would have deals for 40 percent of his crop by the end of August.

Dry conditions and scorching temperatures during the past two weeks across the Midwest have increased the anxiety that farmers have about harvest.

The price weakness is another factor that has kept farmers from pulling the trigger. Corn futures have fallen 29 percent since Jan. 1 on the Chicago Board of Trade and were 38 percent below year-ago levels. Soybean prices have fallen 4.3 percent so far this year.

Commercial short positions decrease

Grain buyers take short positions in corn and soybeans futures to protect themselves from price drops that reduce the value of the grain they have stored, or expect to store, at their facilities.

The slow sales of grain in recent months caused commercial firms to hedge fewer cash grain purchases on the futures market. Their net short positions in corn dropped to a record low 53,597 contracts by the first week of August, according to Commodity Futures Trading Commission data. At the same time, the net commercial short position in soybeans dropped to 78,586 contracts, the smallest since March 2009.

Grain dealers reported an uptick in farmer selling early this week after soybean prices surged on weather-related concerns. Farmers were still reluctant to commit to corn deals, the dealers said.

Even with the recent spate of country movement, commercials' were net short 120,316 corn contracts in corn and 166,867 soybean contracts as of Aug. 20. Both are about half as much as a year ago when farmers sold heavily despite a drought that was cutting yield prospects daily.

"There is just nothing to hedge," said Ronnie Edge, manager at Owensboro Grain Co, a soybean processing plant along the Ohio River in Kentucky. "They made a mistake last year selling new-crop early. This year they did not. There is not much movement yet. I think they will hold on."