Drought Grain Quality and Availability

2012 DROUGHT: GRAIN QUALITY & AVAILABILITY
BACKGROUND
The 2012 drought has brought on a set of market dynamics that are challenging for the grain industry. A warm, dry
winter led to ideal planting conditions in Indiana through June. A prolonged heat wave coupled with little-to-no rainfall
during prime pollination time caused Indiana’s – and the nation’s – corn crop to suffer. As of September 2, only 22
percent of the U.S. corn crop was rated good-to-excellent (8% in Indiana) with 10 percent of the crop harvested. In
addition to the expected short corn crop, grain quality may be an issue as conditions across the Corn Belt are conducive
for Aspergillus ear rot – a fungus that can produce a mycotoxin called aflatoxin which can harm livestock and humans.
Grain quality and availability will be major topics of discussion throughout the 2012 harvest and beyond. Grain farmers,
users of corn and soybeans (including livestock and biofuels producers), and grain buyers should be prepared.
As the 2012 harvest begins, what are some things to think about when looking to buy grain?
• Consider your grain needs for the year NOW and have a clear, written plan in place that addresses sources of
grain.
• Have a discussion with your local grain merchants NOW if you will need to buy grain this fall and into next year.
• Start your conversation about needing grain with grain merchants that you have done business with in the past.
Grain merchants will work with existing customers (who buy AND sell to them) first before accommodating new
customers.
• While harvest has just begun in Indiana, there are some concerns about grain quality after the difficult growing
season, including the possibility of aflatoxin in the corn crop. You can set quality parameters for the grain you
purchase this fall.
• While there may be grain quality discounts on incoming corn (for grain farmers) at grain elevators this year, this
does not necessarily mean grain will be available at lower prices for those looking to buy from elevators.
Does the Grain Indemnity Fund protect a grain farmer or grain elevator who sells directly to a farmer?
• Grain Elevators are never covered by the Grain Indemnity Fund, it is purely to protect the farmer in the event a
LICENSEE defaults.
• Grain elevator-to-farmer grain transactions are not covered by the Grain Indemnity Fund. This means that grain
merchants will more than likely ask for cash or a letter of credit from farmers seeking to purchase grain.
• Grain merchants may request pre-payment or letters of credit before selling grain directly to farmers, including
livestock operations. This is an unusual circumstance for many grain merchants so some additional steps may be
taken before they are comfortable selling grain to individual farms.
• Farmer-to-farmer grain transactions are not covered by the Grain Indemnity Fund, so if grain is bought this way,
buyers AND sellers need to take that into consideration. The exception is if the farmer buying the grain is
licensed by the Indiana Grain Buyers and Warehouse Licensing Agency (IGBWLA). A complete list of licensed
grain buyers can be found at www.in.gov/isda/2399.htm.
Market drivers are pushing grain farmers and grain merchants to sell at harvest. What does this mean for those
looking to buy grain?
• Plan ahead for future needs when it comes to buying grain this fall.
• If grain is bought at harvest for future use, remember that storage fees will be paid on that grain.
• If a seller does not want to make you an offer for a deferred purchase, offer to buy today and pay storage fees
for future delivery.
What financial conversations should farmers have with the diminished crop this year?
• If you are facing a diminished crop or a lack of available grain to feed livestock, talk with your bank – and other
individuals and businesses you work with - about the situation now and what it means for your operation.
• If crop insurance payments for this year’s crop will be used to purchase grain (or other inputs) this fall, a
conversation between the buyer and seller is needed to understand the payment schedule. It is likely a
conversation between the farmer purchasing the grain and his/her bank would be useful under these
circumstances. The bank may need to issue a letter or credit, or extend credit based on the crop insurance.
What are some things for livestock farmers to keep in mind with the possibility of aflatoxin in the corn crop?
• Livestock farmers should consider testing corn that will be fed to be sure aflatoxin levels are in an acceptable
range. Approved labs for submitting corn samples are listed at
http://www.rma.usda.gov/fields/il_rso/2012/aflatoxin.pdf.
• There are quick tests that can be used to immediately to check for aflatoxin. Quick tests are not intended to
replace laboratory analysis, but can serve as a valuable resource to determine if aflatoxin is present.
o Charm Sciences Inc. - http://www.charm.com/
o EnviroLogix, Inc. - http://envirologix.com/
o Neogen Corporation - http://www.neogen.com/
o R-Biopharm - http://www.r-biopharm.com/
o Romer -http://www.romerlabs.com/
o Thermo Fisher Scientific Diagnostic - http://www.thermofisher.com/global/en/home.asp
o Vicam - http://vicam.com/
o A complete list of USDA approved quick tests can be found at www.gipsa.usda.gov/fgis/techservsup/
metheqp/GIPSA_Approved_Mycotoxin_Rapid_Test_Kits.pdf
• Livestock farmers need to remember that if aflatoxin is present in the corn, co-products (including DDGs) will
also be affected.
• If your corn tests positive for aflatoxin, consult your nutritionist to see about of developing a strategy for feeding
the contaminated corn. There might be a possibility to use some of the lesser quality corn depending on the
levels of aflatoxin present and the type of livestock you are feeding.
• Once there is aflatoxin in the grain, it doesn't get better in storage. This means that more corn may be sold at
harvest and that if stored corn is purchased, you need to have it tested before feeding it to your animals.
For more information, contact Indiana Corn Marketing Council and Indiana Soybean Alliance at 1-800-735-0195 or
visit www.incorn.org and www.indianasoybean.com.