There’s nothing friendly about the grain markets lately.  Board prices continue to drift sideways to slightly lower, often taking two steps forward and one step back.  Traders and producers continue to look and hope for a rally, but there is not fundamental reason to push prices higher right now.  Just one carrot in front of the markets right now and that is the lack of producer selling.  As the producer becomes more discouraged by lower prices and disengaged by the forthcoming holiday season, end users keep looking for grain.  Basis is slowing creeping higher, but basis alone cannot do all the work.  Most traders are of the opinion that board prices will have to move higher to help move the grain to market.  The big question becomes when.

This marketing year has the makings of a near repeat of the 2014-15 crop year.  The world is awash in corn and soybeans, but the producer is reluctant to sell at these prices below the cost of production.  This will keep front end basis supported and reduce some of the carry to future months.  And just like last year, barring any unforeseen weather event, we are likely to see a second harvest in late summer to make space for new crop.  When this happens, prices are likely to fall sharply.  Although this isn’t likely to happen soon, it would be best to stay proactive in marketing.  Don’t hesitate to give us a call to discuss market opportunities.

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CHS – Rochester Grain Team
Kasson: 507-634-7545 ext 7
Ostrander: 507-657-2234

Halloween Trick or Treat?

First, the treat.  November is just about to begin and, unlike last year, harvest is quickly winding down instead of just ramping up!  I would venture to guess most prefer this treat to last years tricky harvest season.

This year’s trick?  The markets.  Marketing 101 comes down to the rule of Supply and Demand.  Domestic supply of corn this year will be more than sufficient to meet demand for the year, the trouble is regional supply versus demand.  Eastern corn belt producers appear to have a less than average corn crop this year but eastern belt end-users have not seen slower demand as of yet.  Here in the western corn belt, corn yields have been average to slightly above average.  This regional supply difference is impacting market dynamics from freight costs to basis levels across the country.  Compounding the issue is the fact that a large percentage of producers are not willing to sell at these depressed level, opting instead to pay for storage while they wait for higher prices.  This lack of commercial and processor ownership in the face of stagnant board prices is pushing basis levels higher from southeast back toward the northwest.  Eventually this domino effect will hit our market and levels should improve, however, the timing and duration of basis appreciation is always the question.  At some point we will reach the target price that moves enough bushels to market and keeps the pipeline fully charged.

Read Full Market Update

CHS – Rochester Grain Team
Kasson: 507-634-7545 ext 7
Ostrander: 507-657-2234