WASHINGTON — The Reagan Administration turned on another spigot of grain for U.S. farmers Tuesday with the release of 1.3 billion bushels of corn that had been held off the market in government storage.
The release of the corn came as the drought in the U.S. Farm Belt inflicted further damage on crops and turned pastures brown. The corn stocks could increase the amount of feed available for livestock and cause a temporary halt in the soaring crop prices that have been fueled by the dry weather.
"It's not a big watershed, but it is important. . . . There will now be some flow of corn from the reserve stocks," said John Schnittker, agricultural consultant in Washington.
The corn had been stored in the multiyear farmer-owned reserve program--a program established in 1977 providing farmers with loans from the government if they use their crop as collateral and do not sell the grain while it is in the reserve.
When crop prices hit a certain level--$3.03 a bushel for corn--farmers can repay their loans, redeem their crop and sell it back onto the market. Reserve corn has not been released onto the market since 1983 when drought last hit the Midwestern corn states.
Prices Have Exploded
Most grain experts do not look for a flood of grain to hit the market, at least not right away.
"I don't see many farmers making a move to sell much corn yet," said grain consultant Merril Marxman.
"Even if the corn is in release status, many farmers will hold it anyway in anticipation of still higher prices," Schnittker said.
Corn prices have exploded since the drought set in over the Farm Belt more than three months ago. As prices have risen, many farmers with grain in storage have held on to their crops, waiting for still higher prices.
However, news of the release of the corn caused corn prices at the Chicago Board of Trade to drop back temporarily. The announcement sparked what one trader called "midweek jitters" and a subsequent sharp selloff of corn futures.
Corn in Iowa and Illinois, the two biggest corn-producing states in America, is beginning to enter its most critical growth stage. Estimates are that normal yields could be cut in half if widespread soaking rains do not fall within the next two weeks.
To replenish feed grain supplies for livestock producers, the government has been actively selling corn from its own inventory--selling as much 22 million to 25 million bushels of grain in one day.