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SC Iowa | Hi Fellas.......couple of points.....first to yours Mudsock about not bidding up post-harvest.....there is always a price at which you will want to own corn vs. not owning it....one of the basic rules of grain marketing is that basis does recover from harvest lows once the crop is put away.......today we are bidding -50Z for October delivery which is -66H (March futures).....and we are bidding -20H for last half February delivery....so a 46 cent carry in the cash market for finding a home for corn for 4 months!! But are we buying lots of last half Feb corn...no...because the farmer wants to wait and see how many bushels he has, etc, etc, etc.......so the question is: will they sell corn if we drop the basis bid 15 cents in last half February and make them fearful it's going to get worse instead of better??
Now, about basis in general--------we are entering a new era with ethanol, where basis will become regionalized or localized by what is happening in smaller geographies....up there in nw iowa where Clarence is located, a lot of ethanol capacity has come on line the past two years and they are looking at their second sub-par crop in a row....157 last year and maybe 155-165 this year......move over to eastern iowa and you have far less ethanol capacity that has come online and this will be the second year in a row of 175+ corn in the eastern districts.....the prospects for basis will be dramatically different between those two regions of the state.....and the same thing can be said for many other places in the US....
for instance, in Ohio you have two plants in the SW quadrant of state coming on line in 2008 at Bloomingburg and Greenville.....our Dayton plant has already been paying +25 and up for corn this summer, and the party is just now getting started....same situation developing in east central Indiana for you Bob....
Still, we have to be respectful we're creating a high percentage of our demand base that is 24/7/365 whether it is ethanol or livestock----but we'll be harvesting 13 billion that has to go "somewhere" in a narrow period of time, so we'll have these harvest bulges in many areas that forces the use of a lot of temporary space and/or seeing spot corn priced at huge basis discounts to later sales...
ray j | |
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How high will corn have to go to get the acres this year?
