The corn and soybean markets continue to push lower. The overall economy has had a big influence in the commodity markets. The fundamental news isn’t bullish either. The reversal from a year ago has been amazing; just as the overall market went high last year, the exact opposite is true this year. There is some concern that the supply of grain is growing and there is no concern about grain supplies.
July corn is down 15 cents in the last two weeks and has traded to $3.68. December corn has lost 14 cents and is at $3.91. Speculation on the acreage intention report will continue throughout the month and export demand is much lower than expected.
Farmer selling has been slow which is helping the basis. Basis levels at the river narrowed another 3 to 6 cents in the last two weeks. Nearby basis in southern Minnesota has widened five cents.
The July corn chart has a gap in the $4.20 to $4.30 range which could be a spot that corn could rally to. A gap in the December corn chart at $4.50 leaves some hope for a rally on new crop. It could be difficult to get a rally until the economy begins to stabilize.
Soybeans have been hit hard in the last two weeks with March soybeans down 81 cents, trading at $8.74. July soybeans are at $8.75 which is down 87 cents in the same time period. New-crop soybeans are down 65 cents, trading around $8.27. The speculation of increasing soybeans acres is also weighing on the market. The ending inventory of soybeans could grow from about 200 million bushels to 380 million bushels.
The demand for soybeans is ahead of projections because of China purchasing U.S. soybeans. The South American soybean crop will begin to move on to the market and purchasing soybeans will switch to South America.
The soybean basis at the river and in southern Minnesota is making improvement. The demand for soybeans and weakness in the futures market is moving the basis narrower. The futures market is weaker but the basis is moving narrower.
Basis is critical to marketing grain. There is a lot of grain sold on future fixed contracts and the narrower basis is helping these contracts look better each day. If you have unpriced grain and are waiting for a rally, a narrow basis will help also.
This is completely opposite of 2008 and basis fixed contracts have not been used a lot the last several years. A 10- to 15-cent improvement in corn basis and 25- to 30-cent improvement in soybean basis is adding profit to an already profitable year in 2008.
I get the question “how much should I do?” My standard answer is “some.” Reward the market no matter if it is futures moving or this year with the basis moving. Making big sales and just a few of them puts more pressure on as it does not allow any recovery from mistakes.
“Some” will allow you to recover from early sales at lower prices or wider basis levels. It is important to be a student of what is going on with the market in your area.
Grain Angles is written by Dennis Kelly of LeCenter, Minn.