Thursday, August 29, 2019

Late spring, hot summer unnerving corn markets

The corn price and basis have been on a roller coaster this summer, and it’s not likely to settle down until harvests are well underway.

“Uncertainty over corn availability this fall has injected fear and volatility into the market,” said Cobank in its newsletter this week, “complicating forecasts on profitability for grain elevators. 

“Through May and June, basis in central Ohio rallied 25 cents to the highest level in five years before plunging nearly 50 cents by mid-August. 

“In the futures market, the December-July carry for corn fell from its peak of 32.75 cents per bushel in May to 4.5 cents per bushel in June, then rallied back to 27.5 cents per bushel in August. 

“At an estimated cost of 3 cents per bushel per month for elevators to store corn, the seven-month December-July carry needs to be at least 21 cents per bushel per month for the elevator to break even.”

Elevators that buy low-priced basis are in line for healthy profits as volatility continues, but high-priced basis – as is the situation in the Eastern half of North America – “face steep downside risk,” said  Tanner Ehmke, manager of CoBank’s Knowledge Exchange. 

“Grain handlers will most likely need to compete for bushels in regions that are corn-deficit. 

If old-crop bushels cannot be acquired ahead of harvest and if new-crop bushels are not secured at harvest, elevators stand to face a tough marketing year ahead with mergers and acquisitions in the region increasingly likely,” he said.