Feed grain pricing this fall

There are days I’m really glad that I’m not the commodity risk manager for a production company. In addition to trying to outguess the weather impacts on prices, keeping track of the basis for feed grains and soybean meal can be a challenge.

 

Because of my location at Concord, Nebraska during my career at the University of Nebraska, I have followed the soybean meal bid from Cargill at Sioux City. I continue to keep my eye on this pricing while recognizing the basis for southern Minnesota and northern Iowa region that I now live in may vary somewhat due to localized conditions.

 

For those that have been pricing soybean meal, you know that meal for the second ½ of September currently is priced approximately $50/ton cheaper than for the first 10-15 days. October meal drops another $50/ton. Meal for the second ½ of October thru May is currently priced at $293-299.50 per ton at Cargill.

 

The interesting item in this pricing is that all of the pricing is based on a +$10 per ton basis. While I don’t have written records to display, my recollection is that the historic soybean meal basis at this plant was often -$7-12 per ton. I know that for purposes of pricing swine diets, etc, I often assumed trucking was about equal to the basis for much of northeast Nebraska. Thus, I could be reasonably safe in using the CME price as a good estimate of diet costs.

 

Currently, this swing is basis is worth about $1 for every pig marketed. Not a big number, but when you’re struggling to survive, every penny counts.

 

On another note, I have been hearing stories of country elevators being almost full with old crop corn, almost all of it unpriced yet. If the US crop comes it at 13 billion bushels, where will we put all of the grain? This suggests a very large basis is coming for the harvest season. Western Iowa points are currently bidding $2.75-2.85 for old crop corn with new crop priced about $0.05 less. Assuming we don’t have an early frost, will new crop corn get as low as $2.50 per bushel at local buying points? I sure appears that way to me.

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