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Local basis, got a good laugh
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Maizeing
Posted 3/12/2016 18:44 (#5171988 - in reply to #5171205)
Subject: RE: Local basis, got a good laugh


Ontario's middle east		There are lots of basis traders with their eyes wide open to the change in their markets that e plants have brought. When those traders have millions tied up in facilities their is indeed some turf to defend. We have seen many situations where e plants act as flat price buyers when margins are good and they push basis really hard, especially if the board is soft. When that plays out, especially at harvest time, the basis traders ends up owning corn too high as they jockey for position. They are then stuck holding a hot potato they can't find a home for. I'm suggesting (and I know I can't prove it) that the eplant playing a more passive role in the market, especially at harvest time, would bring down the cash trader's ownership level and therefore their selling goals. I know several guys that just won't forward sell summer basis anymore because they just never know when/ if the e plant will do something goofy.

The basis trader can bring the most value to the chain by flat pricing expensive corn with the farmer and then turning around and selling cheap corn to the end user when price breaks. Benevolent? Maybe, but we do provide a lot of liquidity and margin money to make the world go round. What you have to understand about the grain biz is that the current market is sometimes only a little bit about current dynamics. Sometimes it's a lot about what various players thought about and positioned for months ago.
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