Across the U.S. Midwest, farmers are taking in their annual harvests of corn, soybeans and sorghum. This year, they have a special problem: Where to put it all?

Grain storage levels already have been extraordinarily tight. For the past two years, about 73 percent of capacity was used up in the December peak season, when the three crops are newly harvested. Thanks to Chinese tariffs, lackluster prices and near-perfect growing conditions, there’s likely to be even less space this time around.

The spread between U.S. and Brazilian soybeans has hit a near-record $2.86 a bushel as Chinese buyers look to Latin America to avoid tariffs. That’s left the 4.6 billion bushels of midwestern beans forecast to be harvested this year mostly trading below the cost of production, although the U.S. government’s subsidy program for affected farmers will soften the blow. Crops that haven’t already been sold under higher-priced forward contracts are likely to head into grain elevators to await a better market.

It’s not as simple as that, though. For one thing, stockpiling grain is more expensive than it’s been in the past. Rising interest rates have increased the price of borrowing to pay for commercial storage. Even if you use your own bins, higher oil prices raise the cost of fuel for drying out crops and preventing spoilage. 

For another thing, there simply isn’t the space. Thanks in large part to the threat of tariffs, at the end of September there were already 438 million bushels of soybeans in U.S. stores left over from the 2017 season, up 45 percent from a year earlier and more than double the amount at the same time two years ago. Stocks of corn, which builds the biggest annual pile, are down marginally from last year at 2.1 billion bushels, but still up by nearly a quarter from more typical levels in 2016.

The current harvest is likely to make that worse. A run of ideal weather means that corn yields should hit a record across the country this year, as will soybeans in many states, according to the U.S. Department of Agriculture. Despite the uncertainty around tariffs at the time farmers were sowing earlier in the year, the 2018 soybean harvest hasn’t been cut back at all – indeed, it’s forecast to be the largest ever.

Paying money to store crops in the hope that a better market is around the corner can be a risky trade. U.S. soybean stocks-to-usage ratios – a measure of the surplus harvest as a percentage of the total – doubled in September as the first of the crop started to be gathered, hitting their highest point since 2007. Those for June-harvested wheat are still close to 50 percent after three years of glut. The improving picture for corn in recent months only puts it at levels previously considered mediocre.

Farmers in Brazil and Argentina have been planting record quantities in recent months as they recover from drought earlier this year, so there’s no guarantee that markets nine or 12 months from now will be any healthier. In the meantime, storage costs will make it even harder to turn a profit. Global stockpiles of major crops are only marginally down from their peak levels hit late last year. 

Corn in particular could be vulnerable, especially after its 3.7 percent rally in the past two weeks. Maize fetches about half as much per bushel as soybeans and takes up most of the space in silos. As a result, the best way to maximize returns in the short run is likely to involve selling old corn to make room for the higher-value soy coming in from the fields. Those who hoped the grain glut was over should take heed: It wasn’t dead, it was only resting.

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David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.

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