Posted by: usset001 | May 31, 2012

Corn basis and old crop/new crop inverse send mixed signals

July 2012 corn futures

Nearby corn prices have lost over 70 cents/bu. in the last 10 days, led by a collapse in the July contract specifically and the old crop/new crop spread in general. Cash corn quotes in Southern Minnesota reached nearly $6.50/bu. as recently as May 21. Today they are just under $5.80/bu. The entire collapse can be attributed to the collapse in the July contract, which closed at $6.33/bu. on May 21 and currently trades under $5.50/bu. The new crop December contract is off less than 20 cents over the same time period.

The nearby corn basis remains strong – 20-25 cents over the July contract is the norm thru much of Southern Minnesota and Northern Iowa. This is the earliest and strongest corn basis on record.

A collapsing old crop/new crop inverse and a very strong basis are sending mixed signals in corn. In my opinion, both the basis and spreads are leading indicators for future price direction. They ought to agree!

This is why I like to describe inverted markets as both exhilarating and terrifying.


Responses

  1. Hi Ed
    Any action on your June 4 decision date for 2012 corn? What about 2013 corn? Our crops look excellent.
    Thank you

    Eric Koehl

    • I’ve made my bed on 2012 pre-harvest pricing of corn. I had prices that looked great… until the end of June. I have not started on 2013 but it is on my mind.

  2. In my mba courses we were just talking about the fluctuating price of corn in the market this year.


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