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(Bloomberg) — Piles of unwanted grain on farms near Doug Schmitz’s storage bins in southern Minnesota are a stark reminder of just how bearish the outlook is for U.S.crop prices.

After record yields during the harvest a few months ago, growers in the area still have 80 percent of their corn crop left to sell and 70 percent of soybeans, said Schmitz, who operates four grain elevators and markets to processors and exporters. Normally, half the supply would be unloaded by now, he said. While Schmitz Grain Inc. is under contract to collect 2 million bushels from local farmers, the outlook is so dim that most of that inventory hasn’t been priced yet, he said.

Money managers are holding their most-bearish bets on grain prices since the government started tracking the data in 2006. It’s easy to see why. Stockpiles of corn and soybeans in the U.S., the world’s largest grower, probably were the biggest ever on Dec. 1, and wheat inventories were the highest in five years, according to a Bloomberg survey of analysts. The government will issue its estimate Tuesday.

“It’s the slowest sales pace in the 25 years I’ve been in the grain business,” said Schmitz, who’s based in Currie, Minnesota. “It’s amazing how well farmers were able to put away those bushels and wait for a recovery in prices that has failed to come.”

Full Bins

Hedge funds held a combined net-short position of 337,678 futures and options in corn, soybeans and wheat as of Jan. 5, 19 percent more than the previous week and more than twice what it was a month ago, according to Commodity Futures Trading Commission data released three days later. The bearish holdings were twice the short hedges held by commercialend-users, signaling farmers may be withholding crops that elevators would normally have already bought and hedged. All three commodities posted a third straight year of losses on the Chicago Board of Trade in 2015.

Domestic stockpiles have been swelling as U.S. exports falter, fueled by a strong dollar and rising production by other suppliers. Schmitz said he has yet to load a single rail car this season with corn or soybeans destined for West Coast export terminals. A year earlier, he shipped 1 million bushels.

The U.S. Department of Agriculture forecasts wheat exports in the current season will be the lowest in four decades. Corn and soybeans sold for delivery by Aug. 31 are down a combined 17 percent as of Dec. 31, surpassing the USDA’s estimates for a 6.6 percent annual decline. At the same time, corn shipments from Brazil were the highest ever in each of the past four months. Argentina’s exports have become more profitable after new president Mauricio Macri eliminated most crop taxes and lifted four years of currency controls.
“It is a nearly unprecedented retention of crop inventory this year,” said Roger Fray, executive vice president for Ralston, Iowa-based West Central Cooperative, which can store about 78 million bushels of grain. “The producer has shoved corn and soybeans into places he has never used. It is very possible there will be some forced sales of grain this spring, when farmers need cash to plant crops.”

Production Risks

The USDA will issue its World Agricultural Supply and Demand Estimates (WASDE) report at noon on Tuesday in Washington. The government probably will reduce its estimates of Brazil’s corn and soybean output as well as the forecast of Argentina’s corn production, according to the average estimate of analysts surveyed by Bloomberg. Parts of Brazil were hurt by lack of rain in December, according to Somar Meteorologia. Daily showers in northern crop areas will aid late growth through the next two weeks, Commodity Weather Group said on Jan. 8.

Other U.S. weather risks remain. The current El Nino climate phenomenon has peaked, which may be replaced by a drier pattern known as La Nina in the second half of 2016, Australia’s Bureau of Meteorology said last week. November and December were the wettest since 1895 in the U.S., which could hurt corn and soybean yields later this year, according to T-Storm Weather LLC.

“We need a market-clearing event, whether that’s a demand shock from somewhere or whether that’s a supply shock as a result of weather,” said Gillian Rutherford, who helps oversee about $13 billion as a commodities portfolio manager at Pacific Investment Management Co. in Newport Beach, California. “In the absence of that, we have such a material buffer that it’s difficult to envision a sustained price rally.”

To contact the reporters on this story: Megan Durisin in Chicago at mdurisin1@bloomberg.net; Jeff Wilson in Chicago at jwilson29@bloomberg.net To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net Steve Stroth, Millie Munshi