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For you farmers / marketer's in the East
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KDD
Posted 10/17/2020 22:07 (#8550935 - in reply to #8549192)
Subject: RE: For you farmers / marketer's in the East



Leesburg, Ohio
Front month (Dec) corn futures closed at $4.02 on Friday.
That means the local bids you posted had a “basis” (local difference between futures and cash price) of -1, +28, and +65. Another way to quote basis bids would be “one under, 28 over, and 65 over” the futures price.
I admit, the difference of 66 cents within 15 miles is a big difference, but not that unusual. Are those quotes from places that are actually only 15 miles apart, or are they really each 15 miles from you but in opposite directions, making them closer to 30 miles apart?
The differences can be because of a number of factors, among them would be transportation, local usage and demand, buyer’s purpose (high value end product vs. lower value use), buyers costs of operation, or simply how aggressive a buyer wants to be that day. As someone else mentioned, a particularly high bid may be because a train has to be filled quickly and local harvest is stalled by weather, or a barge arrived and inventory is low. Our nearby Cargill that supplies the ethanol plant next to it went from 5 over to 40 over last week because they just were not getting enough corn in the early stages of harvest to keep the e plant supplied...they got the corn after raising their bid.

This case highlights the reasons for understanding basis and watching basis bids in a somewhat wider area than just the local elevator...financial impact of basis can be very significant, and can pay for a hauling bill or a fleet of decent trucks.

And I hope you are not inferring that all bids should be equal! That would be market fixing/collusion, and is a federal offense.
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