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Drought Puts Grain Elevators And Customers At Risk

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Don Villwock

While grain prices continue to skyrocket, low yields and short crops are causing problems for some farmers and their elevators. No one saw this drought coming; and, as a result, some grain farmers contracted for the sale of this year’s crop last year when prices were much lower than they are today.  As Don Villwock, President of Indiana Farm Bureau, explains, this has put some producers in a very difficult situation, “With the prospect of lower corn prices last winter, some farmers contracted to sell this year’s corn crop at $5 a bushel.  Today, not only is that a bad price, many will not have the production to meet that contract.”  He told HAT there are options for these growers but action is needed quickly, “It is very important they get in contact with their grain elevator or grain merchandiser right now.”  He said, the higher the prices go, the more difficult and costly it will be to roll that contract forward or get out of it altogether.  Several elevators contacted by HAT have reported many of their customers have been on the phone with them working on a solution that will benefit all parties.

Farmers are not, however, the only ones at risk. With this crop loss occurring statewide, many elevators may have trouble finding the grain they need to meet their contracts. Villwock said state officials are keeping a close eye on the financial health of some operations, “Elevators operate on slim margins on a large volume. Without a lot of grain, some may find themselves in financial trouble.” He said the state Grain Indemnity Fund is monitoring the situation and is prepared to warn farmers should a facility develop a problem.  Villwock recently attended a meeting of state grain officials, farmers, and elevators to discuss the issue and prepare for problems this fall. The state Grain Indemnity Fund is designed to protect farmers in the event an elevator or merchandiser goes out of business.

 

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