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Ontario's middle east | Trouble with trying to read much into the old crop cash bean market right now is that it is in the "transition" to new crop. That is an actual merchandising term for the period between crops. It's volatile because of the inversion and the current intense supply and demand signals. It's only got one place to end up...... New crop values...... And it will likely go over that cliff sooner than most think possible.
The fact that your local has to normally pay over cme is irrelevant to futures ....... That is a local factor. It helps to think of basis as simply the price that makes grain move. If the plant is not getting enough, step on the gas, if they are getting more spot than they can unload in a day, step on the brake. If they have go further to get it it costs more.
What tends to happen in the market if the endusers can't buy enough cash grain, they can hedge themselves by buying the front month of the board. This has the effect of bull spreading the market and can cause some of the noncommercials, that worry you guys so much, to cover shorts, thus sparking a futures rally. They are then in a good position to secure cash grain. They can pay less basis as the farmer dumps grain and they are long the board to either sell or exchange those contracts.
We didn't run out of corn last year even though there were guys here saying we were. I believe beans are a similar deal now. It's not that buyers don't want more meal, it's just that they have limits on what they will do for it...... | |
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The "out of soybeans" thread below.
