CHICAGO — Grain merchant Archer Daniels Midland Co. is waiving the fees it charges farmers to dry grain at three of its Midwestern corn processors as it seeks supplies to keep the plants running at optimum levels through a slow, wet harvest period, a spokeswoman said on Thursday.
Farmers, who are weeks behind schedule in much of the U.S. corn belt due to rainy harvest conditions, have been reluctant to sell their grain at current price levels. Free drying offers them a significant break as tight supplies of propane needed to run grain driers have sent costs soaring this fall.
ADM'S chief financial officer said last week the company expected wet crops would lead to increased revenues from its drying operations.
But a spokeswoman said in an e-mailed statement that ADM on Wednesday started offering free drying of corn at 19% moisture rate or less that farmers brought to its wet corn mills in Decatur, Illinois, Cedar Rapids, Iowa, and Clinton, Iowa. The plants process corn into ethanol and produce ingredients used by food and beverage companies.
Corn must be dried to a certain moisture level to be sold, stored safely or processed.
"This has been a difficult harvest for farmers, and we are taking additional steps at a few of our processing locations to help farmers manage the very wet corn conditions," an ADM spokesperson said in a statement.
The three plants can produce an estimated 1.08 billion gallons of ethanol a year, according to data from the Renewable Fuels Association. ADM is considering spinning off its ethanol business as the industry struggles with tight profit margins.
Expected harvest shortfalls, particularly in eastern areas of the U.S. Midwest, will likely impact ethanol production throughout the marketing year, said Todd Becker, president and chief executive officer at Green Plains Inc, which operates 13 ethanol plants.
"In the eastern Corn Belt it is whether you are going to have the corn to start your plant back up or run your plant consistently or whether you can actually afford to buy the corn," Becker said on a conference call with analysts following release of his company's third-quarter results.
Farmers across the Midwest have been scrambling to find propane to dry their crops.
As of Monday, the U.S. corn crop was 53 percent harvested, compared with the five-year average of 75 percent, according to the U.S. Department of Agriculture.