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daniel looker
Frequent Contributor

Strong corn basis--how long?

At an interesting Rabobank session(story herein St. Louis yesterday, several speakers talked about a strong basis in the western Corn Belt. The thinking on the panel was that it will change dramatically by February.

 

Are you seeing a postitive basis in your area? How long do you think this will last? A lot of this demand is driven by ethanol plants that are profitable now, but I'm wondering how long that will last, too, with falling gasoline prices and the EPA getting ready to shave the renewable fuel standard blending mandate. What say you?

 

 

Thanks,

 

Dan

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4 Replies
hardnox604008
Advisor

Re: Strong corn basis--how long?

I'm concerned enough about the possibility to take action. Current basis bids are strong and with only 26 cents carry from CZ13 to CN14 I think you could give much of that up in basis if you wait too long.

 

 

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Jim Meade / Iowa City
Senior Advisor

Re: Strong corn basis--how long?

There has been a good basis here near Cedar Rapids.  

ADM wants corn for the end of November and I sold them half my production.  I expect to sell more soon.

It seems to me that demand is subject to a lot of pressures.  Ethanol and feed are two.  Exports may be a potential bright spot.

Supply is obviously plentiful.

My own subjective feeling is that farmers have been building a lot of on-farm storage and they intendn to use it.  They are not happy with selling $4.50 corn when they sold $7.50 six months ago, but eventually the corn will come out of the bin.  As most wrap up harveest they will have time to think about it.

Those who have seen their CPA for pre-tax planning will be told to not take any more income this year and to spend some big bucks on inputs.

When farmers decide they need to move corn, it is my fear that the basis will go south in a hurry.  I'd be surprised if it lasts till February.  I can see it not making the new year.

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buckfarmer
Senior Contributor

Re: Strong corn basis--how long?

Basis in the -.20 to -.30 around here. Has been since harvest started. More trains loaded out in the last few weeks than I ever remember in such a short time period. I've only sold what I didn't have storage for. Trying to get my head around marketing what is in the bins.
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daniel looker
Frequent Contributor

Re: Strong corn basis--how long?

I'm with you, Jim, on the strong basis not lasting until mid-February. During the panel discussion one of the members, Seth Meyer with the USDA Chief Economist office asked Scott Hansen about how long the good margins may last for ethanol plants. The thinking seemed to be:  maybe through December.

 

Hansen credited ethanol plants in Iowa, Minnesota and eastern Nebraska with driving a lot of the strong basis. As we're seeing here, basis is not strong everywhere.

 

I worry, too, that the basis could collapse pretty quickly. 

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