Time to Shop—for Basis, That Is

December 12, 2013 11:20 PM
Time to Shop—for Basis, That Is

It can pay to look outside your local grain elevator.

With cash corn and soybeans prices much lower than a year ago, shopping for basis has become even more critical for producers who want to maximize sales.

"There are real basis opportunities in the corn and soybean markets right now based on regional supply and demand," says Logan Burgess, a grain broker for Grain Hedge in Bozeman, Mont.
This year, producers selling to ethanol plants are being paid premiums due to crush margins that have returned to levels not seen since 2007.

"Ethanol facilities have been very aggressive bidders of spot corn," Burgess notes. "It often pays for producers to look outside their local elevators and to haul their grain to an ethanol facility."
While basis in general has tapered off into 2014, opportunities still exist for nearby sales into February.

"Coming out of the 2012 drought, we saw exceptionally strong basis levels," says Burgess. "This marketing year we are returning to a more typical basis environment now that grain stocks have replenished, especially for corn."

Leaving Money Behind

As corn and soybean prices slip closer to breakeven for many producers, shopping for basis becomes even more important. Yet many producers don’t harvest the extra money being offered.

"Looking at cash prices over the past 5-10 years shows that basis is becoming more volatile," says Burgess.

Grain Hedge has been collecting and tracking bids from around the country for the past 10 years. Each day the firm tracks 40,000 bids in the cash market.

Six Markets for Corn

"Our research has shown that a producer’s best market will change six times during the year, on average," says Burgess. "But on average a producer will only sell to two separate locations in a year. They are leaving cents on the table."

And each cent per bushel left on the table can add up to big bucks for a corn producer and possibly more for a soybean producer.

Eight for Beans

"Soybean producers need to be even more attentive to basis," says Burgess. "A soybean producer’s best market will change on average eight times during the year."

The "best markets" Burgess refers to could be a river terminal, elevator, oil crusher, ethanol plant, or other end-user of corn or soybeans and take into account hauling and storage costs.

Both AgWeb and Grain Hedge offer tools to help producers find their best markets. AgWeb’s free service provides cash grain bids and basis by ZIP code. Grain Hedge offers more in-depth subscription services for $20 per month, or free to brokerage clients.



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