Marlin: Soft market prices, high basis


As harvest winds down, farmers are storing grain and locking the bins. Low prices are not inspiring sales of the new crops, even while buyers are using high basis to try to take dry bushels to town. 

This is a harvest with many challenges, the least of which is actually harvesting the crop later than usual. We knew this was coming, based on the late planting. 

Lucky in Ohio

Thankfully, we in northeast Ohio have been fortunate to have some of the best weather in recent years to do the harvest in. It is late November, but we are not seeing the rutted fields and muddy equipment we have seen some years. 

Most farmers are well along with harvest, with many finishing this week. I remember all those years when the target for finishing harvest was Thanksgiving. 

A lot of years, Dad and I ate the big meal at lunchtime and gave thanks that we had weather to allow us to go out after the meal and pick the last of the corn. Modern farming with shallow tillage, large equipment, and early planting had changed all that. Then came this year. 

For many, the late Thanksgiving this year is still the harvest-finishing target. Low yields, low test weights, shortages of propane, and high moisture readings are all topics of conversation in the ag community right now. 

Propane shortages

For two weeks the western Corn Belt has had general shortages of propane for drying. Many farmers had harvest delayed, as logistics determined that the unusual demand for propane for drying late and wet crops was coupled with home heating demand in a cold snap. The result was dryers shut off for lack of fuel. That happened in spots in our neighborhood last week, as we dried 26% corn instead of 18. 

In parts of the Dakotas, especially, corn is being left in the field to dry. Farmers are risking field loss to gain test weight and to lower drying costs. 

On our Russell conference call Nov. 25, one associate mentioned that his farmers were used to leaving some corn because the fields got too wet and too much snow, but some would leave 100% of the crop out this year. I heard many scattered reports of the last corn being harvested but at 47% test weight and 32% moisture. The low yields that had been feared are mostly not true. 

Better than expected? 

By some miracle, some of the late corn has still yielded well, and great yields of early corn have made up for some of the drowned spots. I remain dubious of the assumed national yield but will have to wait until January to be vindicated. 

In the meantime, buyers are fighting to get corn with the current prices. Elevators are pushing basis to finish out trains. Ethanol producers and feed mills are pushing basis to grind corn. The result is an average basis 15 to 25 cents higher than normal. 

This is an opportunity to core bins and move a little blended late harvest corn. You might move it on a basis contract and bet the board will improve. It was not a good week for prices. 

Market talk

On the board, corn lost more than two cents for the week, and soybeans lost over 20 cents. There was improvement Nov. 25 as trade rumors helped the market recover. December corn futures are trading at 3.70, up a penny and a quarter. January soybean futures are at 8.98, up a penny. December corn futures made a recent low at 3.653⁄4  Nov. 20, so this is a welcome bounce. January futures broke the magic $9 mark, getting down to 8.963⁄4 on Nov. 25. 

For the soybeans, trade rumors seem to hurt the market more than help on a given day. It seems when the Phase One of the current talks with the Chinese seems to get farther away, prices drop. When talk comes of a signing, recently rumored to be by Dec. 15, prices only recover a little. 

Trust Trump? 

Recently it seems that President Trump has been the one to depress prices. We read of hope of a signing, then he says he is not ready. I am impatient but want to trust his instincts. He was able to negotiate the USMCA agreement, which is good enough that his political enemies will not confirm it, hoping to not let him get credit. 

There are rumors about this that go from immediate consideration to the Dems holding this up till after the election. The working man and the farmer hope this is not true, but the modern Democratic party seems willing to alienate those groups because they are in fly-over country. 

Pardon the politics

Politics are affecting life in the country more than usual. On Nov. 25,  a foreign newspaper is reporting that the Phase One is imminent, and that the Chinese have conceded certain intellectual property issues that have held it up. 

I hope that is true. There would be an immediate market reaction. The size of the reaction will depend upon the volume of sales in the agreement.


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