New Crop Futures Prices Dry weather concerns in the Dakotas and possible ridging in the western corn belt later this month pushed some risk premium into the markets the past few days. December corn closed at $5.91, up 91 cents in 6 trading days. That leaves the market 50 cents below the highs from a month ago. November beans also rebounded $1.10 in those same 6 days and is only 30 cents from its high a month ago. Old Crop Basis Prices Corn and bean basis has dropped significantly among end users throughout the entire Midwest. Corn began to decrease when southern plains end users started cancelling some of their corn purchases and replaced it with wheat in the feed rations. That pushed those corn sales back up the marketing chain and into ethanol plants looking for coverage through June and July. Bean basis fell because most processors covered their needs through July and pulled back bids once old crop futures rallied above $16. With Brazilian beans over a $1/bushel less than US beans in the world market chances are there were likely some switches in origins on exports. As they say, the cure to high prices is high prices. Inverse from Old Crop to New Crop With 90 cent inverses from the July contracts to new crop contracts for both corn and beans, there is no incentive for commercial hedgers to carry product any longer. Therefore, many dumped their remaining positions over the last 2 weeks. Old Crop Demand Late July, all of August, and the first part of September demand remains uncertain. It’s unclear how many bushels remain in on-farm storage, because it seems as if there is very little left. End users throughout the US are claiming they have plenty of coverage on. However, the massive market inverse suggests that’s not what an end user would have done. Inverses usually suggest it’s better to buy later than it is today. The basis market and spreads may have more surprises in a month for both crops. Have We Seen the High’s Yet? This week one analyst said the market highs were in and farmers should sell everything because a huge price drop was coming. The next day another analyst said the current market dynamics and weather is like 2012 and higher prices were probable. That is not very helpful because if either of those are correct it could mean corn prices go to $4 or $8 and beans could be $10 or $20. Going forward, weather and export demand, both extremely uncertain at this point, will have huge market impacts. This likely leads to market “fireworks” well after July 4th.
Jon Scheve Superior Feed Ingredients, LLC
9358 Oak Ave Waconia, MN 55387 jon@superiorfeed.com