Posted by: usset001 | March 22, 2012

I’m still a corn basis bull

In the October 2011 issue of Corn & Soybean Digest, I expressed my bullish opinion of the basis for corn. I went so far as to predict that the basis in May or June could match levels seen in 2011, when the nearby corn basis went positive (over the July contract) in many parts of southern Minnesota and Northern Iowa (current southern Minnesota basis is in the 10-25 cents under the May range). Like you, I read the reports that suggest that basis may not stay strong much longer due to reports that ethanol plants have “covered” their corn needs.

I’m not buying the reports. Corn carryout at the end of the crop year is projected to be the second tightest ever recorded in the U.S. corn market (only 1995/96 was tighter). Futures prices are on the defensive and that helps maintain a strong basis.The accompanying chart (from CashGrainBids.com) shows the steady rise of the corn basis from 60-70 cents under the December contract at harvest to 20 cents under the May contract today.

It will rise even further. I’m still a corn basis bull.


Responses

  1. Our local ethanol plant was 10 cents under at the New Year and is about 20 cents under today, they still are having trouble getting the corn they need to cover needs but not as much as earlier.


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