By Kirk Maltais and Jacob Bunge
A costly tug of war has broken out over what is usually one of the Farm Belt's most ubiquitous commodities: corn.
Agribusiness companies, including Cargill Inc., Archer Daniels Midland Co. and Smithfield Foods Inc. are dangling hefty premiums to buy bushels of corn in places where unrelenting rain this spring prevented farmers from planting millions of acres.
Some farmers, though, are opting to sit on their unsold grain, banking it in case of a diminished harvest this fall -- and the potential for still-higher prices ahead.
"For now, we're waiting," said Ben Klick, whose family raises corn, soybeans and wheat near Navarre, Ohio. "You don't want to be greedy, but guys don't know what to do."
The persistent wet weather that swamped U.S. farmers' fields this spring is now upsetting U.S. grain markets. Corn futures contracts traded at the Chicago Board of Trade have climbed by more than 21% over the past three months on fears that poor planting conditions would cut the U.S. corn harvest to the lowest level in years.
The U.S. Department of Agriculture last month projected 2019 corn production at 13.68 billion bushels, a 9% drop from the agency's estimate in May.
Higher prices for grain -- the main cost of raising livestock and poultry -- could help propel meat prices, which are already increasing after a fast-spreading hog disease in Asia led to the deaths of hundreds of millions of pigs, according to industry estimates. Supermarket data compiled by the USDA showed retail pork prices are more than 9% higher versus this time last year, while beef prices are up 2%.
In a normal year, farmers haul the prior year's crop to grain elevators and to buyers throughout the winter, spring and summer to make room in their storage bins for corn, soybeans and other crops planted in the spring.
This year is different. The wettest 12 months on record in the continental U.S. put many farmers far behind on planting, giving corn plants less time to reach full maturity and upping the risk that an early frost could kill off crops.
The USDA this week estimated that only 57% of the U.S. corn crop is in good or excellent condition, down from 75% at this time last year.
"One thing a farmer learns is that if you can't grow a crop in the new year, you hold on to your old crop to tide you over," said Dave Marshall, a farm-marketing adviser with Nashville-based brokerage First Choice Commodities.
In response, grain buyers are boosting offers to entice farmers to open up their bins. Smithfield Foods, the biggest U.S. pork producer, has offered to buy corn this week at its Waverly, Va., feed mill for 35 cents higher than futures-market prices. Grain company Archer Daniels Midland offered a 20- to 35-cent premium per bushel of corn at its facilities in Ohio and Indiana, where corn-growing conditions have been particularly tough. Rival grain companies Cargill, Bunge Ltd. and Andersons Inc. also have offered to buy corn at above-market rates at facilities from Michigan to Illinois.
"The U.S. corn crop has never been planted this late, so uncertainty over crop size, quality and timing of harvest is creating a unique environment where both users and producers of corn are unsure of what to expect for prices moving forward," a Cargill spokeswoman said.
Cargill said Thursday its quarterly net profit fell 67% from last year, partly due to disruptions from the springtime rain and flooding.
Representatives for the other companies declined to comment.
"End users are in a panic," said Tanner Ehmke, industry research manager for agricultural lender CoBank. Crop traders, ethanol plants and livestock producers "want corn now because of the unknowns on this crop."
The rain and flooding is making farmers "tighter-fisted," according to Jason Britt, president of Central States Commodities Inc., a Kansas City, Mo., brokerage firm. He helps manage his family's northern Missouri farm, where he said more than 100,000 bushels of corn remain in storage despite buyers in nearby St. Louis offering a 15- to 20-cent premium for the crop. In Missouri, the USDA rated only 28% of corn in good or excellent condition this week.
"The circumstances have changed this year, so for us [we need] a larger security blanket," Mr. Britt said.
Higher corn prices are adding costs and cutting into profit margins for the food and fuel makers that rely on a steady stream of corn. Estimated profits on an average gallon of ethanol fell to 1 cent as of July 5 from more than 9 cents in early March, according to Iowa State University research. While major U.S. meat processors have their grain needs covered for the next few months, persistently higher corn prices could add tens of millions of dollars in costs for companies like Tyson Foods Inc., Pilgrim's Pride Corp. and Sanderson Farms Inc., said Ben Bienvenu, analyst with Stephens Inc.
The Maschhoffs, an Illinois-based hog-farming company, spent the spring months persuading farmers to sell more grain and building positions in futures markets to shield against still-higher corn prices.
The company's two grain-storage facilities now stand about three-quarters full, nearly twice as high as the typical level for July, said Drew Hesker, the company's director of financial planning. "We have two million hogs to feed at any given time," he said.
In Ohio, Mr. Klick said he still has about one-third of his 2018 corn harvest in storage bins. Some he needs to feed his cattle, and some he is holding to ensure he can deliver on advance sales already made for this year's crop, which was planted very late.
Mr. Klick said he isn't in a hurry to market the rest, even after an ethanol-plant corn buyer tempted him this week with an offer to buy bushels on the spot for 18% above the futures-market price of $4.36. "I think they'll be just as hungry for corn in August," he said.
Write to Kirk Maltais at Kirk.Maltais@wsj.com and Jacob Bunge at firstname.lastname@example.org