“The Canadian Prairies still have another week of unsettled weather for the eastern part of the region,” Lerner said in an interview on July 2.

That’s to include scattered showers on a daily basis, while Alberta won’t see as much precipitation.

“We will see the western part of Canada drying down and heating up in general,” he added, noting the eastern portion will begin to get less rain during the week of July 8.

“The temperatures won’t be as warm as they will be in the west,” Lerner continued, adding those should return to normal levels.

As for the U.S., Lerner said the Midwest is to be cool and rainy.

“The only areas that are a problem are those in the upper Midwest where you are going to have excessive moisture around for a while,” he commented, noting there could be more localized flooding.

The eastern half of the Midwest and the Delta region will get some timely rains after being drier for some time.

“The southeastern states will finally get some relief from the drying that’s been occurring there for a while,” Lerner said.

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The slower equipment sales are a knock-on effect of corn and soy prices dropping to more than three-year lows as U.S. farm income plummets and equipment makers and dealers are forced to pivot quickly after a period of booming business.

Reuters interviewed ten equipment dealers, mostly in the U.S. Midwest, as well as farmers and analysts, who said low crop prices combined with persistently high interest rates are deterring farmers from purchasing machinery. As farmers make fewer purchases, inventories of equipment are swelling, cutting into profits for dealers and big manufacturers alike.

Manufacturers Deere and CNH Industrial struggled to keep up with the strong demand for tractors in 2022 when farm income hit a record high and pandemic assistance payments gave farmers extra money to upgrade their fleets. Now both expect slower sales to hit their bottom line this year.

Josh Gruett, dealer principal at Waupun Equipment in Waupun, Wisconsin, which sells farm, construction and other equipment, said his inventory has risen 30 per cent to 35 per cent since the end of 2023.

The excess of unsold machinery prompted Gruett to halt new orders from companies including CNH, AGCO, and Polaris in hopes of balancing supply and demand, he said.

In April, inventory levels of high-horsepower tractors (300 and above) in the U.S. surged by almost 107 per cent year-over-year, with combine inventory experiencing a 17.63 per cent increase, according to Sandhills Global, a market research firm specializing in tracking used inventory for industrial manufacturers.

Slashing prices

Chris Tanner, a fourth-generation farmer, said some dealerships in his town of Norton, Kansas, have slashed prices up to 30 per cent with an added incentive of zero percent interest to move machinery off their lots.

“They’re heavily discounting combines and tractors—but after coming through a drought and experiencing poor prices we don’t have the money to spend,” Tanner said.

The pain has also spread to those who sell spare parts.

Guy Robinson, is a parts manager at Dekalb Implement Company, which sells Deere equipment in DeKalb, Illinois

During the peak years of the pandemic, Robinson said, the combination of supply chain troubles and rising demand made getting everything from parts to equipment to farmers “a nightmare.”

And then demand began falling off in late 2022, he said.

About 30 miles south of Robinson’s dealership, Aaron Rogers, retail location manager at AHW, another Deere dealer in Somonauk, Illinois, said zero or low percentage financing is a popular way to try to bring in customers.

“If you can get a good interest rate, that’s what’s driving the market right now,” he said. Offering lower financing rates to sell inventory can result in a loss for dealers, but carrying unsold machinery can prove costlier.

Manufacturers give dealers free financing on equipment for a limited period while they sell it, but once that expires, dealers have to pay interest on their unsold inventory to manufacturers.

With fewer sales forecast, equipment dealers are feeling pressure to auction off equipment “right away” to preserve margins, said Casey Seymour, a sales consultant for dealers.

“Some of the stuff that is being put to auction is because dealers can’t afford to keep the floor plan,” Seymour said. “They can’t have millions of dollars worth of inventory sitting around at a floor plan [with a] 7.5 per cent interest rate.”

Particularly, inventory levels have been a big concern in the Midwest grain belt, said Ryan Dolezal, the manager of TractorHouse, a site for selling new and used farm equipment.

“We do not see the inventory levels issues like we do in Midwest markets,” he said of specialty crop equipment compared to row crop machinery.

Used agriculture machinery inventory, the bulk of machinery sold in the United States, is on a steady increase that is forcing dealers to auction equipment at a lower price point, said Mitch Helman, a sales manager at Sandhills Global.

“For planters there’s a 70 per cent gap between auction and retail and that’s insane. A spread this high has not been observed since May 2015,” he said, referring to a time when grain oversupply was pummeling farmer income.

Deere reports earnings on May 16. In February, the company announced plans to cut production and warned shareholders inflation would make farmers reticent to finance equipment purchases.

Texas-based farmer, Scott Born said given his tighter budget, he’s forgoing buying new or used equipment for the remainder of the year.

“We have to try to limp by without major repairs—it’s tough especially since (equipment and fertilizer) has gone so much higher in just a few years.”

—Additional reporting for Reuters by Heather Schlitz in Chicago

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The company, which reaped big profits as meat prices soared during the COVID-19 pandemic, has since confronted a decline and slowing demand for some products. Tyson has announced the closures of six U.S. chicken plants in about the past year and also laid off corporate employees.

The pork plant employed about 1,200 people in Perry, which has about 8,200 residents and is located near the state capital Des Moines, Mayor Dirk Cavanaugh said.

“It’s a big blow to the community,” he said by phone. “It’s our largest employer in the area. It’s going to be tough to figure out what to do without them.”

Cavanaugh said the plant is set to close on June 28.

Tyson did not respond to questions about the number of employees there but encouraged workers to apply for other jobs within the company.

“While this decision was not easy, it emphasizes our focus to optimize the efficiency of our operations to best serve our customers,” the company said.

Tyson’s pork business had an adjusted operating loss of $128 million in the fiscal year that ended on Sept. 30, down from income of $198 million in the previous year. Its sales volumes fell 2.2 per cent while average prices slid 7.9 per cent.

The plant in Perry slaughters about 9,000 pigs per day, said Steve Meyer, chief livestock economist for Ever.Ag. That accounts for a little less than 2 per cent of total U.S. pork production.

In December, Smithfield Foods said it would end contracts with 26 hog farms in Utah, citing an industry oversupply of pork and weaker consumer demand. Smithfield in October said it would shut a pork plant in North Carolina, after previously confirming it would close 35 Missouri hog farm sites.

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He is not alone.

Farmers across the United States are kicking themselves for putting off corn sales after fields dried up in May and June, fueling expectations for higher prices and smaller harvests. Instead, prices tanked as rains saved the crop. The size and speed of the price collapse stung farmers and left their storage bins stuffed with record amounts of corn.

The steepest market downturn in a decade in 2023 has extended into 2024, hurting the U.S. rural economy. Two years of high prices and tight crop supplies spurred by unfavorable global weather and disruption from the Ukraine war have been quickly reversed.

Record-large harvests in the United States and Brazil, increased competition for U.S. grain exports, and limited domestic demand led to hefty amounts of corn locked away in storage, pushing U.S. corn prices to their lowest level since November 2020 on Wednesday.

Corn is the world’s most traded commodity crop and often sets the tone for other crops. Soybeans, too, plummeted to their lowest prices in more than three years in February.

Ten farmers, economists and market analysts said U.S. growers miscalculated when they held on to corn rather than booking sales. The “store and ignore” strategy of waiting for higher prices has not paid off, leaving some farmers cutting back purchases of pricey equipment and planting less corn. The interviews also demonstrate the tricky decisions farmers face when determining when to sell in the face of potential crop losses.

Corn futures prices Cv1 that approached $6.30 a bushel in June have since tumbled to $4.10, after U.S. farmers ultimately produced record crop yields.

“I wish I sold a lot more,” Henebry said.

U.S. growers held a whopping 7.83 billion bushels of corn in storage bins on their farms as of Dec. 1, the most ever for that date and up 16 per cent from a nine-year low in December 2022, U.S. government data show. Globally, leftover inventories are projected to reach a five-year high by September after accounting for all the corn used to feed livestock, make biofuels and other purposes.

Henebry said he still has about 40 per cent of his 2023 harvest in storage, including 30,000 bushels on his farm in central Illinois. He is paying 3 to 4 cents per bushel a month to keep another 30,000 bushels at a local grain elevator. In a normal year, he would not have any still stored there, he said.

Before prices plunged last summer, Henebry said he sold some corn for $5.50 to $5.70 per bushel and then for as much as $6.21 per bushel delivered to the grain elevator. He held off on further sales because he was counting on poor weather to reduce production and boost prices.

Prices tumbled, though, and Henebry said he sold corn in December for $4.60 per bushel. He wishes he would have unloaded even more at that price.

Prices will come under renewed pressure as farmers do sell the grain they have in storage, analysts said.

“Any sort of little rally, there’s going to be a lot of corn sold,” said Henebry.

‘I’ll just give up’

Fred Huddlestun, a farmer in Yale, Illinois, said he still had his entire 2023 corn harvest in storage last month: about 39,000 bushels at an elevator and 25,000 bushels at home. Prices never reached targets he set to make sales last year, even as he lowered them.

Huddlestun could have earned roughly $360,000 if he had struck deals to sell 64,000 bushels just after Easter; $382,000 around Father’s Day in June; and $307,000 on Halloween, based on Chicago Board of Trade corn futures that represented last autumn’s crop. At current prices, his grain is worth about $263,000. Futures and cash prices often differ by a few cents.

“I kept thinking the market would go up,” Huddlestun said. “I’ll just give up eventually and start selling if nothing happens.”

Huddlestun said he should have sold around $5.50 a bushel. Though all operations are different, breakeven prices for corn growers in central Illinois were about $5.27 a bushel in 2023, including costs for land and other expenses, according to University of Illinois estimates.

Farmers have the space to squirrel away crops after increasing their storage capacity by 24 per cent over the last two decades to 13.6 billion bushels. Storing grain gives farmers more control over when and how they sell, to avoid prices that are typically low at harvest time and to best take advantage of spikes in futures. At grain elevators and other commercial handlers, off-farm storage capacity has increased by 40 per cent to 11.9 billion bushels over the past 20 years, according to U.S. government data.

High interest rates make storage more costly because farmers’ crops are tied up in bins rather than sold to reduce debt, economists said.

In southern Illinois, the second biggest corn-producing state, farmers could actually lose up to $160 an acre growing corn this year, based on corn prices and the cost of production, University of Illinois economists said in a January report. Two years ago, profits reached about $340 an acre.

Such expected losses are rippling through rural America. Net farm income in 2024 is projected to suffer the largest year-to-year dollar decrease in history, the American Farm Bureau Federation, an industry group, said in a report this month.

Deere & Co, the world’s largest farm equipment maker, expects sales of large agricultural equipment to decline 20 per cent this year, due to lower commodity prices and high interest rates.

‘Plenty of corn’

In Wamego, Kansas, Glenn Brunkow, a fifth-generation crop and livestock farmer, plans to delay upgrades to machinery and may try to repair equipment himself, rather than paying a dealership.

“We’re tightening expenses as much as we can,” he said. “We’re trying to limp through putting off some expansion with the livestock, just trying to limp by.”

Early forecasts show U.S. farmers are likely to cut back on corn planting and favor soybeans in 2024. They may struggle to turn a profit with either crop.

Brunkow said he plans to forgo corn planting entirely and grow some sorghum, which requires less fertilizer and has less expensive seeds than corn. Sorghum can be used to make ethanol, feed livestock or be exported to China to make baiju liquor.

Years ago, Brunkow gave up on growing sorghum because it produces lower yields and is difficult to dry at harvest time.

Now, “the economics just are better,” he said. “You’re going to lose less money.”

Analysts do not expect a major bump in demand to draw down corn stockpiles. U.S. exports of agricultural and related products fell 10 per cent by value in 2023 to a three-year low, as plentiful supplies from Brazil and elsewhere challenged U.S. export sales.

Demand from the U.S. meat industry, which feeds corn to livestock, is limited as pig farmers face lackluster pork demand while cattle ranchers slashed their herds due to drought in the Great Plains.

Biofuel demand, which typically accounts for about one-third of U.S. corn production, also worries Rod Weinzierl, executive director of the Illinois Corn Growers Association, as Americans buy more electric vehicles.

“This year every fork in the road has been bearish,” said Matt Wiegand, commodity broker for risk management firm FuturesOne in Nebraska.

—Additional reporting for Reuters by Julie Ingwersen in Chicago.

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The profits of growing six key crops are set to fall by almost a third by 2070, the research said, though losses could be reduced by shifting traditional crop heartlands — potentially reshaping distinctive regional landscapes and livelihoods.

“Our results show considerable potential from crop switching to avoid some of the damages from climate change,” said Naresh Devineni, co-author of the paper and associate professor in the civil engineering department at The City University of New York.

“However, the remaining losses imply that crop switching is not a panacea and that new seed varieties and new adaptation practices are needed to support farmers and meet the food demands of the future.”

The research, published in Nature Communications, analyzed the potential impact of rising temperatures and extreme weather on the profitability of growing barley, corn, cotton, soybeans, rice, and wheat.

It estimated that up to half of the forecast losses could be avoided if farmers adapt to changing conditions by switching crops or relocating fields.

Corn would become less concentrated in the Midwest while the wheat lands of the Great Plains would see a gradual “hollowing-out,” found the paper, which modelled optimum growing areas for crops under changing climates.

Soybean production would have to shift north.

Cotton, which was found to be the most resilient crop to rises in temperature, was also likely to be grown further north and could become the dominant crop in southern California, it said.

In order to minimize the losses, more than half of U.S. counties would have to see changes in the crops planted there by 2070 compared to the present, the research said.

However, even if farmers are able to adjust their plantings, about five per cent of farmland is seen becoming inviable for any of the six key crops by 2070, with southern states likely the worst affected.

“Farmers are particularly exposed to the problems of climate change,” said paper author James Rising, an assistant professorial research fellow at the Grantham Research Institute on Climate Change and the Environment in Britain.

“We need to better understand the potential for adaptation for farmers and policy-makers to make long-term decisions.”

— Reporting by Sonia Elks for the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers the lives of people around the world who struggle to live freely or fairly.

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Farmers in Kansas grow hard red winter (HRW) wheat, the largest U.S. wheat class that typically is milled into flour for bread. The impact of any crop loss could be magnified because supplies of high-protein HRW wheat already are scarce due to low protein levels in the last two harvests.

Also, the U.S. Department of Agriculture in January is expected to show U.S. farmers planted even less winter wheat than a year ago, when acreage fell to the lowest since 1909.

“I think the eastern three-quarters of Kansas is at risk for some winterkill,” said David Streit, a meteorologist with the Commodity Weather Group.

Winter wheat is most resistant to winterkill in December and January. However, temperatures that drop below about -5 F (-21 C) for two hours or more can cause freeze damage.

Readings on Monday could fall to -8 F (-22 C) in northern Kansas, said Don Keeney of MDA Weather Services.

“That is definitely going to cause some issues there, especially as dry as they were this fall,” Keeney said.

Dry soil cools more quickly than moist soil, and about a third of Kansas is in moderate drought, according to the latest weekly U.S. Drought Monitor report prepared by a consortium of climatologists. The entire state is abnormally dry, the report said.

Much of Kansas also lacks snow cover, which can act as a protective blanket for dormant crops.

In Oklahoma, another major producer, temperatures on Monday are forecast to dip to 0 F (-18 C), posing a minor risk. However, if readings dip much lower, “the threat will increase substantially,” Keeney said.

River ice

Frigid temperatures will grip the Midwest as well, although snow cover should protect most of the region’s soft red winter wheat, used in cookies and snack foods.

The cold is likely to hasten the build-up of ice on the Illinois River, slowing barge traffic and impeding shipments of Midwest corn and soybeans to Gulf Coast export terminals.

“We are starting to see some ice form there. I would expect ice over the next five days to really increase substantially,” Keeney said.

Locks need to be de-iced in order for vessels to pass through. “We don’t have any locks that are closed down… but there are impacts affecting the locks,” said Samantha Heilig, public affairs specialist at the U.S. Army Corps of Engineers.

With portions of both the Illinois and Mississippi rivers frozen, there was less water flowing downstream. On the Mississippi River at St. Louis, water levels next week were expected to reach the lowest point in about four years, according to the National Weather Service.

— Julie Ingwersen is a commodities correspondent for Reuters in Chicago; additional reporting by Michael Hirtzer.

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“We are leaking lower,” said Brian Rydlund, a broker at CHS Hedging. “We have got guys (farmers) really getting after the beans, which pressures the market a bit. Brazil been noticeably dry and it looks like that pattern is going to change.”

Wheat futures edged higher, finding support from technical buyers near the low hit on Monday, while corn was close to unchanged.

Chicago Board of Trade soybeans for November delivery dropped 6-1/4 cents to settle at $9.84-3/4 a bushel (all figures US$).

“Soybeans are seeing a continued pullback in selling from the $10 a bushel level we reached after the (U.S. Department of Agriculture) cut its forecast of U.S. crop yields last week,” said Matt Ammermann, commodity risk manager at INTL FCStone. “The $10 level is important psychologically and I think there needs to be a considerable level of fear in the market about crops to sustain it.”

“The fear is not present today. Market focus is now turning to the South American soybean planting season and we are currently seeing some more crop-friendly weather forecasts in Brazil.”

CBOT December wheat futures were down 1-3/4 cents at $4.34-3/4 a bushel and CBOT December corn was 1/2 cent lower at $3.50 a bushel.

The outlook for dry weather in the U.S. Midwest added some pressure to the beans as farmers were expected to catch up to their typical harvest schedule in the coming weeks. Wet conditions have prevented some farmers across the region from accessing their fields in the past week.

“This should be a hot week for cutting beans, with nary a drop of rain forecast for the entire belt until we get to Friday afternoon, and then pretty limited amounts for the bulk of the harvest areas until the middle of next week,” Charlie Sernatinger, global head of grain futures at ED+F Man Capital, said in a note.

USDA said in its U.S. crop report on Monday that 28 per cent of U.S. corn has been harvested as of Sunday, behind market expectations of 31 per cent, and up only six percentage points from the previous week.

Harvesting of the U.S. soybean crop was 49 per cent complete, matching analysts’ expectations.

— Mark Weinraub is a Reuters correspondent covering grain markets from Chicago; additional reporting by Michael Hogan in Hamburg and Naveen Thukral in Singapore.

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Anticipation of a freezing blast began to build this week when weather maps and forecast models showed similarities between next week’s system and one that developed in January 2014.

“Upper-level atmosphere configuration very similar in scale + magnitude as infamous Jan 2014 #PolarVortex popularized by me and @afreedma,” meteorologist Ryan Maue said on Twitter on Tuesday alongside maps comparing the two weather systems.

The southward shift in the polar vortex in 2014 brought the Midwest some of its coldest weather in two decades. Icy conditions snarled travel and thousands of flights were canceled or delayed.

Frigid temperatures combined with gusting winds to create life-threatening wind chills as low as -51 C that killed at least nine people.

The coldest weather next week is expected in the Midwest and Northeast starting around Tuesday, according to forecasts that show temperatures in the single digits in some cities.

“The air mass on the way for the middle of December is likely to be substantially colder when compared to that of this past week and this weekend,” AccuWeather meteorologist Paul Pastelok wrote on Thursday.

Temperatures from the northern and central Plains to wide swaths of the Midwest are likely to drop by between 5 and 20 F compared to temperatures this week, according to AccuWeather.

It is unclear how far south the cold air will be felt, according to Pastelok.

Chicago, the largest city in the Midwest, is bracing for temperatures in the teens next week, according to an AccuWeather forecast, which showed a low of -8 C for Wednesday and Thursday.

Further north in Minnesota, Minneapolis-St. Paul NBC affiliate KARE forecasted temperatures dropping to -12 C on Tuesday of next week, then -13 C on Wednesday.

— Timothy McLaughlin is a Reuters reporter covering the U.S. Midwest from Chicago.

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The Pro Farmer Midwest Crop Tour’s full results are due to be released Friday. So far the tour has been bullish for corn, as early estimates have been lower than those released by the U.S. Department of Agriculture.

On the other hand, soybeans are seeing nothing but bearish factors, said Scott Capinegro, president at Barrington Commodity Brokers.

“Rain makes grain for beans. We got two beautiful systems out there,” he said.

Well-timed rains in the U.S. Midwest on Monday and Tuesday were bearish, as they lent themselves to soybean growing.

Exports for both soybeans and corn to China are below last year’s pace, Capinegro said, and China’s problems are especially problematic for grains. “It’s just not a good thing.”

China’s move to devalue its currency, the yuan, indicates a slowing economy and moves the greenback higher, which makes it difficult for the country to export commodities.

Capinegro pegged corn’s “worst-case-scenario” downside at $3.35 per bushel in the September contract, as a result of harvest pressure (all figures US$).

Corn posted gains of 10 cents per bushel in the September contract over last week’s prices, and the November contract added 10.5 cents per bushel.

If weather in the Midwest continues to be favourable for the rest of the month, Capinegro said, the downside for soybeans could hit $8.70 in the November contract.

Soybean prices slipped by 25 cents per bushel and 11.25 cents per bushel from last week’s prices in the September and November contracts respectively.

— Jade Markus writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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Corn firmed as a weekly U.S. Department of Agriculture report showed a slight decline in the crop’s condition, while wheat futures declined on weak demand and plentiful global supplies.

Overall, price movements were restrained as grain markets awaited more indications on corn and soybean yields from this week’s Pro Farmer Midwest crop tour that started on Monday.

Chicago Board of Trade November soybeans fell 12-3/4 cents, or 1.5 per cent, to $9.04-1/4 a bushel after earlier coming within a penny of a two-month low (all figures US$).

Overall ratings for U.S. soybean crops were unchanged on the week with 63 per cent considered good or excellent, USDA said Monday.

Weather forecasts for the U.S. are predicting widespread rain in the coming week, which should help soy crops in dry parts of the Midwest.

“August is when you make the beans. Some of the areas were in need of some rain, even the good areas, and we are getting it,” said Don Roose, president of U.S. Commodities.

A sharp drop in Chinese share prices dented market sentiment, stoking concerns about a slowing economy in the world’s top commodities importer and No. 1 soy buyer.

CBOT December corn rose 2-3/4 cents, or 0.7 per cent, to $3.77-1/4 a bushel, drawing support from a fall in USDA’s good-to-excellent crop rating to 69 per cent, down one point from the previous week.

Spread trades involving long corn positions and short soybeans and wheat added support.

Crop scouts on the first day of the Pro Farmer Midwest crop tour found below-average yield potential in Ohio on Monday and strong prospects in South Dakota.

The four-day tour will release its findings for Indiana and Nebraska on Tuesday. Early field reports indicate surprisingly strong corn and soybean yield potential in central and north-central Indiana and above average yield potential in southeastern Nebraska.

CBOT September soft red winter wheat fell 6-1/4 cents, or 1.1 per cent, to $4.94-1/4 a bushel. September hard red winter wheat shed 6-1/4 cents, or 1.1 per cent, to $4.76 a bushel.

— Karl Plume reports on ag commodity markets for Reuters from Chicago. Additional reporting for Reuters by Gus Trompiz in Paris, Naveen Thukral in Singapore and Julie Ingwersen in Chicago.

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