Market Matters Blog

Warm Weather Gives Early Start to Spring Ritual

By Mary Kennedy , DTN Basis Analyst
On Feb. 22, the South Dakota counties of Sully and Potter posted "spring" load limit restrictions on truck weights. This was nearly one month early as the recent warm-up is causing frost to come out of the ground earlier than normal. (DTN photo by Elaine Shein)

In some areas, an early spring may bring early load limits on rural roads. That could be a problem with so much grain in on-farm storage. When selling starts, we could see a lot of it all at once -- a kind of "second harvest -- which could be detrimental to basis.

When the frozen ground thaws in late winter and early spring, some road beds -- especially older highways and gravel roads -- become saturated and the potential for damage from heavy trucks is high. On Feb. 22, the South Dakota counties of Sully and Potter posted "spring" load limit restrictions. This was nearly one month early as the recent warm-up is causing frost to come out of the ground earlier than normal. The National Weather Service in Sioux Falls reported record temperatures on Saturday, Feb. 27, in Mitchell at 69 degrees, 70 degrees at Huron and Sioux Falls tied a record a 63 and on Sunday temperatures reached 68.

Tim Luken, manager of Oahe Grain in Onida, South Dakota, told DTN it was the earliest he had seen load limits come on. "We have lost 98% of our snow," he said. When asked if farmers were nervous about the early load-limit postings, Luken said, "farmers are still reluctant to haul anything due to low prices."

Jerry Cope, who does the grain marketing for Dakota Mill & Grain, Inc. in Rapid City, South Dakota, told DTN, "Road restrictions and the predicted warm-up will have many thinking of farming and not hauling. South Dakota weight limits are based on the number of axles and axle spacing. Trucks with double trailers that are properly set up can still haul full 100,000 pound loads over seven-ton per axle roads. That will create opportunity for custom trucks, such as we have, as farmers do begin to market. However spring thaw, less than seven-ton restrictions and soft farmyards will slow movement. The net effect could put off grain movement even later and become a harvest before the harvest in May and June."

"In Day County, the highway department reserves the right to put load limits of six-tons per axle on March 1, and I think most counties in South Dakota are similar," said Ryan Wagner who farms in Roslyn, South Dakota. "Depending on the weather, they sometimes put them on right away but most often wait if it's cold. This year, it looks like they will likely be put on right away on Mar. 1. Since this is an every year occurrence I don't think it will disrupt farmers' plans because they are accustomed to it now and plan accordingly."

Wagner added that he thinks there is a misconception that a lot of farmers don't follow those load limits. "The fines are so steep that it just isn't worth it and more importantly, we have a vested interest in protecting the roads, so I think most everybody is very careful not to be overweight."

HOW MUCH GRAIN IS LEFT TO MOVE?

In his area, Luken said, "Corn is 40% sold and I would call on-farm storage at 70% full yet between wheat, corn and sunflowers. Lots to move as each day is getting closer to harvest and basis levels are going to get wider yet as we go forward. Already see them slipping."

Stocks in western South Dakota are mostly wheat, sunflowers, millet (other birdseed) and some corn, Cope said. "Farmers acknowledge that most bins are full, or near full, but low prices have kept them at bay. That said, we are seeing signs of resignation to having to trade the market at hand rather than the one they want," he added. "Cash flow concerns would lead us to guess that there will be less new bin building than in years past. That won't bode well for prices or elevator logistics."

"There is a lot of corn, beans and wheat to move but I don't really see any 'panic selling' so to speak just yet. But like you said, with rents coming due and spring being a high cash flow time of year, we could see a little of that," said Wagner.

"One thing I have noted is there seems to be a lot more basis contracts this year, so even if we do get a futures rally this spring while farmers are busy and/or load limits are in place, I think guys will take advantage of that to lock in the futures leg of their basis contracts, which could keep a lid on rallies. There are also a lot of elevators that have been offering free DP (delayed pricing) for quite a while now, so any rally will likely cause guys to price DP bushels they hauled this winter to generate cash."

I have been talking to elevator managers and farmers elsewhere about the sizable amount of grain still sitting in bins and my opinion is that we may see a good chunk of it move at one time. Wagner said, "I think you are spot on with the "second harvest" hitting around June 1 with all the grain yet to move, which could really be negative to basis."

South Dakota's load limits can be found at: http://www.sddot.com/…

All other affected states can be found at that state's Department of Transportation (DOT) websites.

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow her on Twitter @MaryCKenn

(CZ/BAS)

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