Interesting basis levels

[roarintiger1]

In addition to the CBOTs rally in old corn today of 18 or so cents,  the local ethanol plant in my area increased their bid by 17 cents as well.  A nice 35 cent increase in one day.   What's up with that?   Did they finally look inside their grain bin and realize there wasn't anymore in there?   The auger rattling should've been their first clue.    

[rayjenkins]

Near $105 WTI crude has re-invigorated late summer margins, and now these ethanol plants want to buy corn for late July and August....

It appears that dry mill ethanol plants will be driving the show for balance of summer, far different than 1996 when they all shut down by early July, leaving the food ingredient processors and livestock feeders to duke it out....

[Farmerjoe79]

You are starting to hear out there that people are starting to fight for corn. Ray what do you think your basis will be in a couple of weeks if sept stays were it is?

[rayjenkins]

+150U means $7 cash corn......that was what all the farmers said they wanted....well, 48 hours ago....

didn't buy much cash corn today, so I guess the farmers are convinced it is 2012 all over again....and who knows, it might be....but at some point, if the rally continues there will be old crop corn getting sold by the farmer, and we have a pretty good sized pool of farmer corn within 50 miles of the plant...

we have folks working on the logistics of bringing corn north from SEMO in Missouri by the end of August, maybe a bit sooner.....once that kind of stuff starts happening it will be a race between old crop sellers trying to get out before basis goes to +50U from +150U  and the new crop sellers hitting the best bids they likely ever see for their 2013 production.....

we are right now trying to figure out just how little corn we want to own on August 15.....if nothing else, there will be rail corn available out of the north country for LH August....

good luck to us all..

Ray J

[Farmerjoe79]

It sounds like some of that missouri corn will be on the market earlier then thought. Looks like they are going to have some 100 degree temps the next couple of weeks. Don't know if that is bullish or bearish:)

[gmanfarmer]

Ray.....with that "pool" of corn you talk about within 50 miles....how much is it?  5 days worth??  How do you really know how much is it?  I question if these farmers if they are telling you this on up days in the market and say they "have a ton".......or are they filling you full of chaff?   I REALLY thought and question this as you mentioned nearly a year ago crops down there were garbage due to the drought.  If there was really plenty of it out there we wouldn't be doing the funky basis crap using further out months and jumpin from one future back and forth.  Its a silly game ive never seen in history.  My point is people say they got it but dont.  ....Doesn't matter from a producer or a enduser.  We had the biggest crop in the nation up here last year and we as a hole are pretty well cleaned out.  Ive talked with many up here say the same thing.  Hard for me to believe the bins are full down there with a history making drought in that area.   .....especially within 50 miles from an ethol plant!

[Farmerjoe79]

Spot on gman. What did rayj say that they use 11000 bushels an hour at the plant he buys for. If the average farmer down there holds 5000 bushels and they were spaced every 1/2 mile away he would clean them out in a week. Ray I don't think it is out their but I have been wrong before.

[Farmerjoe79]

The question to be asked is do you think 8 dollar corn is not going to happen this summer?

[cyjd]

Ray,
Considering what CR is bidding over U better narrow that 50 mile circle down a little. The feed mills are the one who are going to need corn later in the season and is where the fireworks could be. No one(elevator or commercial) in their right mind would carry an ownership position through this basis market and alot of integrators haven't covered hard bushels. Paper bushels for coverage might be a worthless hedge in 60 days

[kraft-t]

You don't think Ray has good communications with his regular customers. You are assuming his plate is empty when i bet he contracted supply available for much of his preharvest needs. He is absolutely right in that one day new crop corn bid will come together with the old crop bid. You can hold that bushel forever but when the buyer has enough, he has enough.

In fact new crop basis ought to tell you that they aren't overly concerned about acquiring new crop needs. Perhaps you don't think it is a favor to tell you that basis levels may well dive before harvest. Don't beleive him at your own peril.

BTW I have a few bushels of old crop corn and i have nearly pulled the trigger more than once. I've been waiting for a market explosion pre harvest, but its looking doubtful that will occur. I'll not be holding much longer without a big bull movement.