At the risk of sounding like a broken record, weather is the market maker. Rains in our region have been favorable in the past few weeks, and our crops are reflecting the improved weather. However, headline traders and fund traders want nothing less than perfect weather throughout the entire US. As we all know, this is nothing short of impossible. So, as the weather models fluctuate, so do grain markets.
Standard weekly reports this week kept the market guessing once again. Crop conditions released Monday afternoon showed a bigger than expected drop, driving prices sharply higher overnight, only to sell off hard Tuesday. The sell off continued through Wednesday before uncertain weather models helped the market recover on Thursday and again on Friday. Thus far the near term models show cooler temperatures which is helping to minimize potential impact of less than perfect rain fall in parts of Iowa and Nebraska.
The local supply of grain seems more then adequate to meet local demand. However, soybean basis has shown signs of improvement late in the week, even as the board started to stabilize and even move higher. Now that we are at the end of July, most bean bids have rolled to the November futures, some improving bids in the process. Corn basis on the other hand, has shown more weakness this week. The inevitable farm-to-market movement of last year’s record crop has begun. Look for end users of corn to continue to soften basis and cut hours as the supply pipeline continues to be plugged.
Don’t keep wondering… ASK A MERCHANDISER!
What does it mean when you say the bids “rolled to November?”
Simply put, when grain buyers “roll” bids, they are changing the futures contract being used to establish cash price. Instead of using August (SQ) futures to establish cash price, the November (SX) future is now used. Many times the cash price will remain relatively flat through the futures roll, however the basis will change. In most situations, the basis will widen in an amount equal to the difference between the old futures contract and new futures contract. For example, today, August beans are roughly $0.13 lower than November futures. So the basis is likely to get wider, or worse, by $0.13. A -$0.24SQ basis becomes a -$0.37SX basis.
Aaron D. Ulland
CHS – Procurement Merchandiser
Kasson: 507-634-7545 ext 7
This Material has been prepared by a sales or trading employee or agent of CHS and should be considered a solicitation. The information contained in this presentation is taken from sources which we believe to be reliable, but is not guaranteed by us as to accuracy or completeness and is sent to you for information purposes only. There is a risk of loss when trading commodity futures and options. CHS bases its recommendations solely on the judgment of CHS personnel.