Price grain now or wait is a fundamental question growers ask themselves year-around. The right answer for each grower always depends on many factors. Ed Usset of Corn and Soybean Digest poses this question and tries to answer using historical cash price analysis. Bryce Knorr of Farm Futures provides a basis outlook which is also an important consideration when pricing grain. Combined, this grain market analysis yields an important perspective for growers asking themselves if they should price grain now or wait.
Ed Usset’s article begins with a critical historical fact.
If you examine cash prices over many years, it is a fact that average prices in the Corn Belt reach their peak in the May/June period.
Drought in Argentina explains much of the corn and soybean price rally from the start of the year until early March. Higher prices are good because you have unsold bushels from 2017 in storage. In addition, planting season looms and 2018 new crop prices look appealing. Can the rally continue into the April-May-June (AMJ) period?
Price rallies in the spring – old crop and new crop – happen quite often in both corn and soybeans. If you examine cash prices over many years, it is a fact that average prices in the Corn Belt reach their peak in the May/June period. In about three of four years, cash prices in the month of May will be higher than prices during the previous harvest. The odds are in your favor if you decide to hold some bushels for pricing in May and June.
Concerning new crop pricing opportunities, spring and early summer is the “too-too” season. Planting season is an anxious time – the temperature is too hot or too cold; the soil is too wet or too dry; planting progress is too early or too late. Anxiety during the “too-too” season can lead to higher prices and favorable pricing opportunities.
Visit Usset’s article to view the table he has constructed that illustrates how pricing in AMJ has been a good decision 3 out of 4 years.
Now that I have your hopes up, let me throw a little cold water on basis. Basis will continue to frustrate this spring and summer. The poor basis you are experiencing simply reflects the ease of buying grain in the country.
I will not disagree if you decide to wait another month or two to price old and new crop grain.
Bryce Knorr of Farm Futures provides a more near-term discussion of basis outlook titled “Basis Outlook – High water and trade fears keep cash market turbulent”. He highlights
Exporters race to fill shipments to beat China tariffs.
Fear can cut both ways in the market. Futures prices plunged whenever talk of new tariffs on Chinese soybean imports surfaced. But basis in the cash market firmed in the export pipeline as farmers backed off on sales just as shippers raced to fill barges and get shipments delivered before any new measures actually take hold.
The cost of barges shot higher on that demand, just as ongoing high water troubles on the river system also increased costs. Rains increased flooding again from the lower Mississippi River to the Ohio River, but stronger basis at the Gulf absorbed that expense in the race against the clock.
Cold weather in the upper Midwest kept the opening of traffic to northernmost stretches of the Mississippi on hold. Ice on Lake Pepin south of Redwing, MN, wasn’t as thick as during the Polar Vortex of 2014. But most years the Army Corps of Engineers has already stopped doing surveys there by now.
Further downstream, long delays were still noted overnight along portions of the Ohio River, where minor flooding may be an issue until April 18, according to current forecasts. Tows are only moving during daylight hours on some stretches of the Mississippi closer to the Gulf.
Average soybean basis strengthened a nickel at terminals and three cents overall, but there were losers too. Country elevators feeding terminals weakened bids because new purchases might not be able to make it out the door in time to beat any tariffs from China.
Soybean processors benefited from crush margins that soared near four-year highs, and boosted basis three to 12 cents as a result. But buyers away from that action generally weakened bids.
Basis in corn, little of which goes to China, was less impacted by the turmoil. Average bids firmed a penny even though farmers with roads that weren’t posted or muddy had time to move grain thanks to the slow start to spring. Basis improved on the river system to the Gulf, and those selling to rail terminals shipping west also saw strengthening thanks to good demand off the PNW to Asia.
Buyers at ethanol plants headed in the other direction as margins came under pressure and China moved to add new tariffs to existing sanctions. Plants were steady to a dime lower this week.
The interactive maps below show how basis fared around the country. Click the box in the upper left-hand corner of the map to bring up the legend, and to turn features show on or off.
Knorr offers the reader an interactive map showing basis change and cash price. The map doesn’t have a legend so be sure to click on the site closest to you to reveal the cash price and basis change.
The interactive map and Knorr’s wheat basis discussion can be found at farmfutures.com.
Despite the busy spring planting season be sure to capture any favorable marketing opportunities as history suggests we are nearing peak times to price grain.
Image Courtesy NPR.org