Basis, a rare bird

[Rob SC NE]

Just read Roy Smith's new column. He talks about what a rare bird it is when his cash corn bid is higher than the futures  For Roy, it's 12 cents over September futures, which compares with minus 75 cents last October 15.

In June, he'd pointed out that conditions were setting up for a squeeze when September futures get into delivery. "The current basis move indicates that traders are thinking cash supplies might get tight enough that it will be difficult for holders of short positions to find corn to deliver against their contracts."  So, there's a rush to buy cash corn, pushing up the price faster than the futures. 

When will this end?  "Odds are very good that the current basis situation will not last until harvest," Roy says. Supplies of corn coming to town from the field will cause basis to slip even if futures prices rise."

Corn here's been up to plus 15 cents. What's going on in your area with the basis?  - Rob 

[Palouser]

At what point are September futures shorts forced into buying physical corn? I don't see it myself, but perhaps I don't understand the situation.

[rayjenkins]

Taking delivery against July futures may have made sense depending on where you took the delivery and where the demand point that needed the corn was located..

September is a completely different animal.....by the time you could take possession, get it loaded out and delivered to the ultimate end user----you might be looking at very late September or early October----and you could likely have access to new crop harvest by then.....

[jweiser1925]

We need to be closer to Indiana & Ohio for better bids:

http://poetbiorefining-fostoria.aghost.net/

This may be a year that we will have a plus Basis on corn out of the field at harvest.

[ag678]

Remember the it also depends what kind of inverse you rolled into from the July.  Definitely a good year for a Aug contract. 

[DW11]

Rare indeed.  Basis at local ethanol plant is +45.  It has never been this good in my memory.  Normal basis for this time of year would be -20 to -50.

[viperkev]

When basis is that strong then there is definitely a shortage of corn unlike the bull$hit that USDA reported June 30th. With weather far from perfect I will hold my long Sept. corn for the blow-off top especially when the drought of Texas moves into the heart of the midwest!

[Palouser]

If there is an alternate explanation I would sure like to hear it, but it is /has been one of my top questions about this market. A physical tightening is a logical explanation - but think how long before corn harvest of magnitude gets underway!

So far none of the other explanations of market behavior recently take into account an explanation for this phenomena. Or is this just a series of very local situations - which doesn't make a lot of sense - but I haven't seen a basis map lately.

If this is widespread the market will have to react fairly soon IMO.

[Soyfarmer]

Here in eastern Ontario our basis for sept. is 1.30  over Dec. Some mills are bidding a bit more on as needed. We are late Oct. before we will have any amount off the field.

[Canuck_2]

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@Soyfarmer wrote:

Here in eastern Ontario our basis for sept. is 1.30  over Dec. Some mills are bidding a bit more on as needed. We are late Oct. before we will have any amount off the field.

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That is better than SW Ontario.

One of the best spot bids here is +75 over Sept or $305.59/t

Believe your bid would be about $320/t

FOB farm is $307.50 to maybe up to $310/t