Since the completion of harvest cash basis levels for soybeans and especially corn have quickly improved, in fact many areas are seeing a positive basis.
However, even for wheat basis has narrowed in some areas.
Why is this price appreciation happening?
Tomm Pfitzenmaier with Summit Commodity Brokerage says its a function of farmers closing the bin doors after harvest and not selling at these four year lows in prices.
However, it is also a function of a smaller crop in some areas than expected and strong demand for corn.
Ethanol production, which has been hitting record levels the last two weeks and corn exports are also running nearly 42% above year ago levels.
With prices at four year lows the demand from export customers and processors is supporting basis levels which in some cases are above the futures board and that is translating into better cash grain prices for farmers.
Pfitzenmaier expects this could continue through the end of the year as farmers will hold inventory locked away until after the first of the new year for income averaging and tax purchases or to generate operating capital.
He advises taking advantage of the strong basis by making some cash sales.
However, if farmers are wanting to leave the top side open in case there is a possible rally he says they might look at buying a call as those option prices are relatively economical right now.
