From the Editor for Nov. 11
Nov 16, 2011
From The Editor
Nov. 11, 2011
Hello Pro Farmer Members!
Welcome to winter! Snow moved into the Midwest this week. Most of it is gone in northeast Iowa, but there are enough spots still visible to let us know the season is changing again.
I meant to talk about corn and soybean basis in the newsletter this week, but ran out of space. I wanted to spend some time focused on corn basis in particular. There is a lot of talk in the market about stronger-than-normal basis... and this basis isn't just strong for this time of the year... it's strong for any time of the year! That makes it exceptionally strong for a post-harvest market.
There are three reasons for strong basis:
- Strong demand
- Slow movement of the physical commodity
- Strong demand and slow movement of the physical commodity
Movement is slow... and there are few piles of corn sitting at elevators across the Midwest. There are a few in northeast Iowa and other scattered around the Corn Belt, but not nearly enough to suggest there is a burdensome amount of corn out there.
One of the reasons for that is there was plenty of on-farm storage available when the 2011 corn crop harvest got started. That's because everybody (yes... I do mean everybody) cleaned out their bins in the summer of 2011. USDA said there was 315 million bu. of corn stored on-farm as of September 1, 2011. If there was that much out there, it was held by livestock, dairy and poultry producers. Cash grain farmers had emptied their bins.
And now they are full again. And they're likely to stay full until the market delivers the right incentive to open the bin door, fill a hopper and haul it to town. Right now, growers don't have that incentive... and they probably won't until spring.
We don't anticipate much additional basis strength... unless demand really kicks up... until end-users really need to refill supplies. That's not likely until late January or early February. We also, however, don't expect much (if any) pressure on basis.
That's it for this week...
Have a great weekend!!