Bob Utterback, President of Utterback Marketing and Farm Journal Economist, is cautioning that the carry into the 2011 wheat market could lead to wider basis levels this fall for corn and soybean producers. He believes the carry in the market to the July 2011 CBOT wheat contract, which today stands at about $1 per bushel, will lead farmers to store more wheat. This will mean less storage availability for corn and soybeans and could bring a more-typical harvest glut on the market this fall.
"The July wheat futures for 2010 compared to 2011, the carry in the market is paying you 96 cents gross margin before basis adjustment. There is no carry in beans and there's no carry of significance in corn."
"There's an old saying I like to use that says 'don't follow the rhetoric, follow the money.' The commercial elevator is in business to make money. If we fill the bins up with wheat and two months later we have the corn harvest coming and the bins are full, that's going to put corn basis under pressure."
Utterback says the transportation infrastructure in the country is adding to this pressure. If the wheat carry continues in the market, the chance of this coming to fruition grows every day. The problems will become more evident throughout the summer as more wheat goes into the bin.
He suggests farmers consider on-farm storage for this fall's needs and take market positions to protect themselves.