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Soybean harvest: The count goes on

10/28/2011 @ 2:55pm

Soybean harvest is mostly finished here in Cass County. Corn harvest is winding down and some are about done. My small acreage has been done for over a week. This early harvest probably accounts for some of the basis improvement seen in both soybeans and corn in the last few weeks. I don’t haul directly to the processors myself. However, farmers who do say that the waiting time to dump is very short. Buyers for the plants wonder where the beans are this year.  They improve the basis to try to convince farmers to sell rather than store.

The rebound in prices Thursday confirms my bias that the dead cat bounce for 2011 is for real. Whether or not prices will go higher from here, all criteria for a typical bounce have been met including the normal 15 days above the harvest low in cash prices. Today was the 15th day. The dead cat bounce for 2011 is complete. All that remains is to make the actual cash sales. That can theoretically be done any time between now and the end of December. It is Management decision based on a judgment call.

To summarize the history of the move this year the graph of prices clearly shows the harvest low on October 7. The cash price that day was $10.58. Two weeks later on October 22 the price was $11.62. That was the price after ten trading days. The high for the move was $11.85 on October 14. The bid on the close today, October 28, was $11.57, or a price improvement of $.99. I still anticipate that there will be another high equal to or exceeded the October 14 high. However, it does not have to happen to make this one of the best bounces in history.

One of the features of the bounce is a big improvement in basis. So far the soybeans basis improvement has been $.40. I observed that the basis yesterday for soybeans delivered after November 1 dropped a dime. I hope that this is not indicating that the really good basis bids are going to fall next week. That is usually the first sign that a top has been made for the time being.

The basis bids for corn went from -$.50 to -$.27. That is also a positive sign when it happens during harvest as it has this year. Basis bids for corn need to be watched closely. At this point both basis and the carry between December futures and July futures indicate higher prices ahead. As with soybeans, these factors need to be watching closely for any hint that the basis will worsen or the carry get wider. I will check both of these factors frequently for signs that it is time to make cash corn sales.  

On Monday I bought back my short hedge positions in the soybean market and sold cash soybeans. With the basis of -$.65 I was able to net just over $13 for the cash beans. That was my goal when I made the sales last summer. If I had waited two days, I could have gotten another nickel. However, the basis could also have gone the other way after such a big improvement in such a short time. Also, commercial storage started the next day and would have taken away some of the basis improvement. My goal for the next sale is October 14 high.  

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