To say grain markets are volatile right now would be an understatement. Let’s start with corn. In the May WASDE report, we got our first look at the 2021/2022 balance sheet. This first look at the carry out for next year came in a 1.5 billion bushels, 250 million bushels than the current carry out for this fall. This was accomplished by using a trend line yield of 179.5 bushels per acre. Since that report corn futures have lost nearly $0.60 in both old crop and new crop. From a basis perspective, there have been wild moves there as well. Demand for ethanol continues to pick up pace as more driving picks up across the country. On the other hand, river and export facilities have seen their demand slip some as lower priced South American supplies start to fill the global market. Despite the 1.2 billion bushel estimated carry out projected for this fall, the market feels tight, meaning there is potential for the market to recover a portion of the recent losses.
On the soybean balance sheet, very little has changed: soybeans are in very short supply. Just a few weeks ago many domestic soybean users were very concerned with supply for this summer which was reflected in the strongly positive basis values paid throughout the area. However, as the futures market put in new highs in early May, producers rewarded the rally and sold more beans than expected. This resulted in a precipitous drop in basis values as crushers became more comfortable with ownership and have opted to slow their purchases.
In spite of the dramatic loses in futures prices recently, it is worthwhile to remember there is still opportunity to protect a profit in this years crop. There is still time. While it is late May, there is a lot of weather to get through before the crop is in the bin. Bullish markets like we have been experiencing recently often give us more than one chance to participate. There are plenty of tools available to help protect these profitable prices, in many cases for more than one crop year. Contracts such as the CHI Foundation contract can protect a floor price while also participating in upside market movement. Other available compass contracts can allow bushels to be priced at a premium to the current market, provided the market stays above a predetermined trigger value. For more information on any of the available contracts CHS has to offer, and how we can help protect these attractive prices, reach out to your local grain originator. We are here to help you.
Written by Aaron Ulland