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S Illinois | +1. Elevators and non end user commercials run a simple accounting system. They buy cheap basis and take advantage of the carry’s with little regard for board price. For example in a more normal structured market, they can be long at say -20CZ at harvest. With a normal carry of say 25 to CN that same bu would put them at -0.45 basis CN futures. With normal basis appreciation they could likely sell even or possibly positive basis to an end user come summer and earn that 45-50 cents.
With strong harvest basis and little carry this year they are sitting at say -0.05 basis CN equivalent for each bushel they buy. There is no margin for them to earn so no reason to store and take the chance of spoilage or loss. | |
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