Home / News / Business news / Strong corn basis expected to weaken

Strong corn basis expected to weaken

DANIEL LOOKER 11/13/2013 @ 12:47pm Business Editor

Strong demand from ethanol plants and slow farmer selling has helped drive the local basis for corn to unusually strained levels, but that situation is likely to change dramatically next winter and spring.

That's the view held by several analysts who spoke Wednesday at the Rabo AgriFinance Agribusiness Summit in St. Louis.

The carry in corn futures is telling growers to store corn, said Scott Hansen, a grain merchandizing specialist with White Commercial. But a strong basis reflects the need by ethanol plants and others for corn that's still being harvested in places like his western Iowa neighborhood. It's running 15 to 30 cents a bushel over futures prices.

Even the posted cash bids don't tell the whole story, he said.

"We've seen premiums trade 45 to 50 cents over the posted bid," he said. But those prices aren't made public.

He expects grain to remain tightly held by farmers, until February 15, or "the John Deere low."

That's the name given for a seasonal selling pattern based on farmers' need for cash to make payments. He expects bankers to be putting pressure on some borrowers to come up with more working capital for 2014.

They'll be telling producers that, before approving operating loans, "you're going to have to put some skin into the game," Hansen said.

After that, the basis could change sharply. "It could be real ugly, basis-wise, in the summer," he said.

Don Close, vice president of the Rabobank Food & Agribusiness Research Advisory group, agreed that with the big increase in on-farm grain storage in recent years, corn sales are likely to remain light for now. He expects "aggressive movement and collapse in the basis in the second half of the [marketing] year."

CancelPost Comment
MORE FROM DANIEL LOOKER more +

Most of Ag Welcomes Fast Track Bill By: 04/16/2015 @ 5:30pm Commodity groups and the American Farm Bureau Federation welcomed the introduction Thursday of…

House Repeals Estate Tax But Obama Veto… By: 04/16/2015 @ 5:04pm By a vote of 240-179, the U.S. House voted to repeal the estate tax Thursday. President Barack…

Q&A: Al Franken, Senator & Former… By: 04/14/2015 @ 3:03pm The creator of the Saturday Night Live self-help guru Stuart Smalley is becoming a big presence in…

MEDIA CENTERmore +
This container should display a .swf file. If not, you may need to upgrade your Flash player.
Planter tips: Finger pick-up
Agriculture.com

FREE MEMBERSHIP!

CLOSE [X]