Analyze Basis During Planting

06:34PM Mar 25, 2019
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Corn and soybean prices are typically highest in the spring and early summer. But, the rules of grain marketing are less certain, as continued trade negotiations and record global stocks weigh on the markets.

Regardless, you need to be ready to seize smart marketing opportunities. Do so by watching basis, which is the difference between local cash prices and the futures price at the Chicago Board of Trade.

“In the grain world, the most important concept is basis, basis, basis,” says Richard Jelinek, vice president global education at INTL FCStone Financial. “You need to be a student of basis and stay on top of how basis is reacting in your local region.”

Continuously collect basis for your delivery locations as often as possible but at least once a week to create a historical record to see how current basis is behaving compared with normal levels, he says. Watch for patterns to indicate marketing opportunities.

“Studying your local situation and having conversations with local processors can help you get a handle on not only why your basis level is where it’s at, but on where it could be going in the coming months,” says Chris Barron, president of Carson and Barron Farms in Rowley, Iowa. “Matching delivery dates for when processors want grain can pay big dividends on basis.”

Especially in April and May, farmers have a good opportunity to capture favorable basis, says Barron, also a financial consultant for Ag View Solutions. “The processors need grain because we’re all busy. The co-ops are busy, the elevators are out, they’re spraying and doing a lot of the things they need to be doing.”

Know your production, storage and transportation costs, encourages Stephen Nicholson, Rabobank senior analyst for grains and oilseeds. This will help you decode your local supply-and-demand picture. If stocks are adequate, basis values will be wide and are likely to remain wide. If stocks are tight, basis values will be narrow or inverted.

“Look beyond your backyard for good selling opportunities,” Nicholson says. “By coupling transportation costs and basis knowledge of the wider geographic area, farmers may discover a market that nets more per bushel than the local market.” 

Corn vs. Soybean Basis Bids

Both corn and soybean basis have come up from their lows, according to early March basis maps from Rabobank, which includes basis bids from around 3,000 locations. Corn basis is healthier due to stronger export demand versus soybeans, says Rabobank’s Stephen Nicholson. Farmers should be nimble and ready to cash in on positive moves in basis. “These opportunities will probably be short; now is not the time to be complacent,” he says.

Here are the March 13, 2019 basis maps from Rabobank.

Corn

 

Corn basis map - March 13, 2019

Soybeans

Soybean basis map - March 13, 2019