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You have power!

Agriculture.com Staff 04/20/2007 @ 12:15pm

Back in early March I sold come corn for May delivery. The manager of my local elevator told me he was glad I opted for deferred delivery because his house was full and he could not take corn immediately. I delivered the corn this week. The same manager said that his firm is just not buying much corn and that he would be glad to get what ever he could for now. The shortness of current corn availability has caused the basis to be the best it has been in a long time. I don't keep records of local basis, but my memory tells me that it has been a couple of years since the basis has been under 30 cents.

Even more impressive is the change in spreads between July futures and December futures. July futures staged an impressive rally this week, but December futures did not follow suit. Such a move is normally an indication of improving fundamentals in any market. The market is saying it wants corn now, not this fall. That is a positive sign in a market that has been struggling following the February high.

In last week's column I wrote that planting delays seldom result in sustained rallies. One individual responding on the "Marketing" talk page said that I did not understand the fundamental situation this year and that this year would not be normal. My point was not that prices can't rally because of planting delays. My point was not to be disappointed if delays do not cause prices to improve. This year is different because of anticipated demand caused by ethanol. It is also different because the price of new crop corn is a dollar a bushel higher than it was in other years when planting was delayed. That means any rally must start from a much higher level than is usually the case.

The price strength this week was the result of demand for old crop corn because of few farmer sales. We have the power to affect prices over the short term. If it had been from planting delays, December futures would have increased faster than May and July. I hope the price strength continues and this is one of those years when the rally lasts into June. If good weather next week results in continued erosion of prices, I will not be surprised.

Back in early March I sold come corn for May delivery. The manager of my local elevator told me he was glad I opted for deferred delivery because his house was full and he could not take corn immediately. I delivered the corn this week. The same manager said that his firm is just not buying much corn and that he would be glad to get what ever he could for now. The shortness of current corn availability has caused the basis to be the best it has been in a long time. I don't keep records of local basis, but my memory tells me that it has been a couple of years since the basis has been under 30 cents.

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